A BIGGER-THAN-EXPECTED slide in China’s imports in May strengthened expectations more policy stimulus may be needed to avert a sharp slowdown in the country.

    Economists say persistent weakness in the country’s imports point to a slackening domestic economy. Meanwhile, erratic global demand and a relatively strong yuan, also cast doubts over the government’s ability to hit its full-year trade growth target of 6 percent.

    Annual exports in May fell 2.5 percent while imports tumbled 17.6 percent, data from the General Administration of Customs showed yesterday.

    “The data show the Chinese economy is still in the process of seeking a bottom. We expect trade conditions to continue to be sluggish in the following four-five months, with more government policy rolling out to stabilize (the economy),” said Liu Yaxin, macro strategist at China Merchants Securities in Shenzhen.

    Liu added that Chinese companies were being outflanked in global markets due to a relatively strong yuan currency.

    China posted a near record trade surplus in May of US$59.49 billion, but weak imports highlight slowing domestic consumption.

    Many analysts have already penciled in sub-7 percent growth for the second quarter, raising the risk that the government will not meet its full-year growth target of around 7 percent.

    China’s exporters have been struggling to cope with weak overseas demand, rising labor and currency costs, exacerbating downward pressure on the economy.

    In May, exports to the United States, China’s top export market, rose 7.8 percent from a year earlier, while shipments to the European Union, the second largest market, dipped 6.9 percent, customs data showed.

    China’s leading index on exports fell in May, the third straight month of decline, heralding “the relatively big pressure on exports this year,” the customs said.

    The yuan has gained against major non-dollar currencies in recent months, leading to its rise on a trade-weight basis, but Premier Li Keqiang has ruled out a devaluation.

    Imports of oil and iron ore in May fell 11 percent from a year earlier, underscoring soft demand at home and oversupply.

    Bloated stocks could take months to draw down, prompting steel mills to pump up exports of steel even at weak prices.

    China’s trade grew 3.4 percent in 2014, missing the government’s growth target of 7.5 percent by more than half.

    Combined exports and imports fell 8 percent in the first five months from a year earlier, customs data showed.

    (SD-Agencies)