China Unexpectedly Reports Record Trade Surplus As Exports Of Face Masks Soar Tyler Durden Sun, 06/07/2020 - 11:25 In a time of collapsing global trade, China was a surprising outlier. Early on Sunday, China reported that in May its trade surplus unexpectedly surged for a second consecutive month, jumping to a record 443BN yuan, or USD$62.9BN, up from $45.3BN in April and smashing expectations of a $39BN surplus, even as exports declined by 3.3% in USD terms - less than the expected 7% - boosted by a surge in exports of medical products including facemasks. With exports shrinking, it was the sharp plunge in imports - which tumbled 16.7% - more than April's 14.2% decline and the -9.7% consensus print, and were largely the result of sliding commodity prices that pushed the resulting trade balance to a record high. In month-over-month terms, exports fell by 2.4% in May vs. +4.3% in April, while imports contracted further by 5.3% in May (vs. -3.9% mom sa in April). China's record trade surplus came as the price of commodities the country imports such as crude oil, nat gas and soy beans all plunged. At the same time, exports have rebounded of their recent lows (if still down on a Y/Y basis), propped up in part by sales of masks and other medical supplies as countries around the world battle to stem the spread of the coronavirus pandemic launched by China. For major products exports, exports in textile and fabric goods - a category which largely relates to surgical face masks and other personal protective equipment - increased sharply by 77.3% yoy in May (vs. +49.3% yoy in April), and exports in plastic articles went up significantly as well by 54.4% yoy in May (vs. +63.8% yoy in April). Growth of exports in medical equipment accelerated to +88.5% yoy in May (vs. +50.3% yoy in April), and exports in automatic data processing machine also remained strong at 48.2% yoy in May (vs. +49.9% yoy in April). Exports in electronic integrated circuit accelerated to +18.7% yoy in May (vs. +7.0% yoy in April). Exports in other major goods were generally down year-over-year. "The recent acceleration in export growth of anti-epidemic materials contributed considerably to China’s exports," CICC analyst Liu Liu wrote in a note quoted by Bloomberg. "China’s full-year export growth in 2020 may be better than our previous expectations." So to boost its economy, all China needs to do is start another viral pandemic and then simply flood the world with medical equipment it desperately needs to avoid mass deaths. Not a bad strategy. Adding to the optimism, Liu said that net exports of goods and services in the second quarter will increase substantially from a year earlier, swinging to a "large positive contribution" to GDP growth after dragging in the first quarter. * * * On the import side, while China increased commodities imports, the average price fell, resulting in lower values. According to the customer bureau, the average purchase price of crude oil slumped 21.2% in yuan terms in the first five months of the year, although the volume of purchases rose 5.2%. The price for coal, natural gas, soy bean and other commodities also dropped. The value of auto imports shrunk by 31.3%. Indeed, for major commodity imports - in value terms - copper imports decreased 0.4% yoy in May (vs. -5.2% yoy in April); iron ore imports decelerated to -2.0% yoy in May (vs. +18.2% yoy in April); crude oil imports were down sharply by 55.1% yoy in May (vs. -49.3% yoy in April). In volume terms, copper imports increased 20.8% yoy in May (vs. +13.9% yoy in April); iron ore imports slowed to +3.9% yoy in May (vs. +18.5% yoy in April); crude oil imports rebounded 19.2% yoy in May (vs. -7.5% yoy in April). “The slump in imports is mainly due to a high base from last year and the fall in commodities prices,” said Xing Zhaopeng, an economist at Australia and New Zealand Banking Group Ltd. in Shanghai. “The volume of most major import items rose, showing China’s economy is gradually recovering.” Broken down by geography, exports to the U.S. slipped 1.2% from a year earlier, while those to India slumped 51% and Brazil’s were down 26% as those countries' economies remained paralyze amid the rapid spread of Covid-19. Imports slumped 13.5% from the U.S., 43.5% from Hong Kong and 29% from the European Union. Summarizing the data, Goldman said that "exports data have surprised to the upside in the past two months, partially helped by strong growth of exports related to medical supplies. But exports momentum may remain sluggish in the near term, suggested by weak exports order indexes under manufacturing PMIs in May (though improved from April), reflecting still weak overall global demand."