The WSJ report, "China posted solid export gains in May, pointing to improving global demand for the nation's goods and providing a bright spot in the outlook for the world's second largest economy.
But surprisingly weak imports in the same month raised concerns over domestic demand, suggesting that the economy isn't out of the woods after its sluggish growth early this year.
Exports climbed 7% year over year in May, according to official data released on Sunday. These were in line with market expectations of a 7.2% rise and marked a healthy improvement over the 0.9% advance in April and the 2.3% decline year on year in the January-April period.
The improvement in exports probably reflected the end of distortions in comparisons with year-ago data.
Early last year, many exporters used over-invoicing of their exports to bring currency onshore, skirting foreign exchange controls, to take advantage of a then-rising Chinese currency. That practice was reduced—if not eliminated—after authorities warned in May last year they would impose tough penalties on firms found to be falsifying reported data.
Analysts said that a slightly weaker yuan currency—which has shed about 3% against the dollar this year—may also have helped exports in May this year.
The 1.6% drop in imports in May was more worrisome as analysts polled by The Wall Street Journal had been looking for a 6% rise.
"Continued subdued import growth seems to reflect slow growth of demand in China's economy," said Louis Kuijs of Royal Bank of Scotland in a note to clients.
China's economic growth slowed to 7.4% year over year in the first quarter of 2014 after a 7.7% year over year rise in the final quarter of last year.
Beijing has responded to the sluggish performance, trying to boost domestic demand with a series of measures such as speeding up spending on railways and offering tax breaks for smaller businesses in what has been dubbed a "mini-stimulus" package.
More recently Beijing told local governments to accelerate their spending on approved projects--where money has already been allocated—or risk losing those funds. It has also told commercial banks to make funds available for mortgage loans to help the important—but ailing--property sector.
Property prices fell month over month in May for the first time in nearly two years, according to an unofficial data provider. Official figures on new housing starts showed a drop of nearly 25% in area terms over the first four months of the year, the latest period for such data.
Analysts said the mini-stimulus measures may be working, as shown in the improved official manufacturing Purchasing managers index, a gauge of factory activity, for May. They added that imports could start to pick up in the coming months.
Overseas shipments from China improved across a broad front in May with exports to the European Union climbing 13.4% and those to the U.S. rising 6.3%, according to the General Administration of Customs. Exports to Taiwan were up 14.7 % while those to the Association of Southeast Asian Nations climbed 9.1% and those to Japan added 2.2%".
Meanwhile, the improved exports and less-than-robust imports led to a substantially wider trade surplus of $35.9 billion for the month, up from a $18.45 billion surplus in April, and topping economists' forecast of a $23.4 billion surplus".
