China’s Foreign Reserves Climb to $3.232trn as Exports Boom

China’s foreign exchange reserves climbed by $31.21 billion in May to $3.232 trillion following a surge exports amidst falling the U.S. dollar index, according to data released Friday by the People’s Bank of China.

The result was larger than the $20 billion increase anticipated by economists in a poll by the Wall Street Journal. 

China’s exports grew more quickly and for a second month in May, suggesting factory owners are managing to find buyers overseas and providing some relief to the economy as it battles to mount a durable recovery.

The jury is still out, however, on whether the export sales are sustainable while a protracted property crisis has led to persistent weakness in domestic demand – a factor highlighted again in last month’s imports figures.

“Headline export numbers are surprisingly good, and that confirms the underlying trend, volumes are running very high,” said Frederic Neumann, chief Asia economist at HSBC.

“China is currently so competitive, that even trade restrictions wouldn’t really slow the export juggernaut that’s underway.” However, “if US demand buckles, then the global trade cycle is quickly going to fizzle,” Neumann said, adding that a sustainable longer term growth strategy for China requires its domestic engine to fire up.

According to Reuters, outbound shipments from the world’s second-largest economy grew 7.6% year-on-year in value in May, customs data showed on Friday. But imports increased at a slower 1.8% pace, from a 8.4% jump in the previous month, highlighting the fragility of domestic consumption.

The export figure beat a forecast 6.0% increase in a Reuters poll of economists and a 1.5% rise seen in April, though growth was likely also aided by a lower base of comparison, after rising interest rates and inflation in the US and Europe squeezed external demand in the previous year.

Over recent months, a flurry of data has shown different parts of the $18.6 trillion economy recovering at varying speeds, heightening uncertainty about the outlook.

While first quarter growth blew past forecasts and strong March export and output data suggested improving global demand might aid officials’ efforts to get the economy back on track, and more recent indicators reflecting soft domestic consumption have eroded much of that earlier optimism. #China’s Foreign Reserves Climb to $3.232trn as Exports Boom

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