MercoPress. South Atlantic News Agency

Chinese imports in May dropped 25% and exports 26%

Even when trade is contracting, China’s stimulus plan seems to be working

Chinese exports dropped by a record amount in May as demand for its goods from the US and Europe slumped. Exports fell 26.4% from the same month earlier, more than February's previous record drop and imports declined by 25.2%.

As a result, China's trade surplus, the difference between what it exports and imports, narrowed by 33% to 13.4 billion US dollars from the same month last year. This might mean that the politically sensitive trade gap with the US has narrowed.

China did not report separate figures for its US trade, but the US figures for the previous month showed the trade gap was still growing.

On Wednesday, the US said its trade deficit has widened for the second straight month in April; the deficit with China widened by 7.3% to 16.8 billion.

In the past, the US has accused China of boosting exports by keeping its currency, the Yuan, artificially low.

Separately, a state news agency said that China's investment in fixed assets - such as factories and real estate - surged 32.9% in the first five months of the year from the same period last year.

The government has begun spending some of its 586 billion US dollars stimulus package announced last December to boost domestic demand as exports dropped.

In related news consumer price inflation in China fell for the fourth straight month in May.

The index fell 1.4% from the same month last year, according to the National Bureau of Statistics. This was driven mostly by declines in non-food items, though the price of China's most popular meat, pork, fell by 32% from last year. The prices of non-food items fell at an annual rate of 1.7%, while food prices fell by 0.6%.

Prices for goods have dropped as demand for Chinese exports slumped due to the deep recessions in the major US and European economies.