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China to announce trade surplus for May

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China to announce trade surplus for May

A worker in a Chinese face mask factory in the Henan province
Photo: ChinaDaily

The Chinese General Administration of Customs is today expected to indicate that China ran a $42 billion trade surplus in May.

Last month, the country announced an unexpectedly high surplus of $45 billion. It was fuelled by an unexpected increase in exports—especially of medical supplies such as masks.

However, there are many factors that indicate that such rapid growth of China’s trade surplus is unsustainable. While foreign demand for Chinese medical equipment should remain strong in May and June, it will likely wane in late summer as many countries observe a decrease in active COVID-19 cases. Export demand in sectors like manufacturing may remain low for months, especially while China continues to undermine Hong Kong’s sovereignty.

The potential economic repercussions of China’s actions, such as heavy trade restrictions or even a US withdrawal from the trade deal signed in January, could make partners in America and the EU more hesitant to resume trade, thereby stunting the growth of Chinese exports and lowering Beijing’s trade balance. However, barring an escalation over Hong Kong, expect the Chinese trade surplus to grow modestly by the end of the year as the global economy begins to reopen.

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