Export sector cushioned by COVID-linked demand

China’s exports have held up remarkably well in the face of the sharp slump in global activity. They contracted just 3.3% y/y in US dollar terms in May. The detailed trade data published today show that a large part of that resilience was the result of disruption caused by the COVID-19 pandemic, which has led to an unprecedent surge in global demand for face masks, drugs, medical equipment, and work-from-home gear. These products made up only 3% of exports last year but 14% of exports in May. Without that boost, China exports would have contracted much more sharply last month. This support probably won’t last, as the transition to working-from-home reverses and stockpiling of masks and other protective equipment slows. There is a good chance that China’s exports will weaken in the near term as a result, even though the global economy is now bottoming out.