China's foreign trade growth slows in May

BEIJING -- China's foreign trade growth slowed sharply in May, partly as a result of new government rules to curb capital inflows disguised as trade payments, new data has showed.

Total foreign trade volume grew 0.4 percent year-on-year last month to $345.1 billion, a significant pullback from the 15.7-percent gain in April, the General Administration of Customs said on Saturday.

Exports inched up merely one percent year-on-year to $182.77 billion, while imports declined 0.3 percent to $162.34 billion, leaving China with a surplus of $20.43 billion.

The export data came in much lower than market expectations, even considering the effect of the government rules to curb hot money.

Rising momentum in China's foreign trade in recent months has raised suspicions that companies may have misreported exports to obtain tax rebates or to bypass the country's capital controls to move money into the mainland, prompting authorities to release new rules to check the flows.

"The May data reflected China's recent crackdown on hot money inflow", noted Chang Jian, China economist with Barclays Capital.

She said whether the weaker-than-expected data would lead to loosening policies needs to be reviewed with other key industrial data due on Sunday.

"The government would be very concerned. But I think the new leaders have lower bottom line of GDP growth at around 7 percent, compared with the 7.5-percent rate that we previously expected," she said.

In the first five months of 2013, China's foreign trade expanded 10.9 percent year-on-year.