CHINESE EXPORTS fell by a record 26 per cent in May as the global slump continued to batter the country’s manufacturing sector, while imports also fell sharply, data showed yesterday.

Analysts said that a sustained recovery in China, the world’s second largest exporter, is unlikely until demand from major buyers of Chinese goods such as the US and the EU starts to pick up.

As in previous months, there are signs that the government’s four trillion yuan (€416 billion) stimulus package is offsetting losses from trade, with domestic investment showing strength and consumer spending remaining buoyant.

Fixed asset investment in infrastructure, real estate and factories rose 33 per cent in the first five months of this year, compared with a year earlier, according to the National Bureau of Statistics in Beijing. Chinese economic data is ever more keenly watched by the world’s other major economies, which are hopeful that China’s resilient growth – still expected to come out at about 8 per cent this year, despite the downturn – can help lift the global situation.

China is uncomfortable with the role of the world’s economic saviour, however. The global economic crisis has wiped out millions of manufacturing jobs in China. The government does not believe a quick turnaround in trade is likely, and has introduced a series of higher export rebates on steel products, electronics, machinery and toys.

The customs bureau said that imports dropped 25.2 per cent last month, compounding China’s trade woes, but on the plus side, it is less than the 43 per cent drop registered in January.

China is left more reliant on the home market than ever and the government has cut taxes, increased lending and introduced measures to keep the currency stable in the face of shrinking overseas demand. Demand for commodities such as iron ore has also increased, lifted by the stimulus plan. It becomes a delicate balancing act for the Chinese government as it can only keep propping up domestic demand for so long without the much-needed input of funds from the export market.

There are positive signs – the country’s export orders index has started to expand again after nearly a year of contraction, and there are tentative signs of improvement in Japanese exports and output.

China’s property market is also showing evidence of recovery, and sales rose 45.3 per cent in the first five months to 1 trillion yuan

(€104 billion) from a year earlier, the statistics bureau said. This allays fears that real estate market collapse could compound the current downturn, and compares with a 19.5 per cent decline for 2008.

Chinas global trade surplus in May narrowed to €9.5 billion, down 33 per cent year on year, compared to €11.6 billion a year ago.