While China's narrowed export decline in May was an encouraging sign, official data showing unexpectedly weak imports added to concerns about the country's trade prospects.
Exports slipped 2.8 percent year on year to 1.17 trillion yuan (191.16 billion U.S. dollars) last month, recovering from a 6.2-percent drop in April and a 14.6-percent slump in March, data from the General Administration of Customs (GAC) showed on Monday.
The improvement, which beat market forecasts, was mainly driven by warming trade with G3 economies, especially the United States, China's second-largest trade partner, HSBC chief China economist Qu Hongbin said.
His views were echoed by Liu Liu, an analyst with CICC's macro research team, who said the data showed external demand may be stabilizing thanks to a stronger G3, which includes the United States, Japan, and the Eurozone.
The mild recovery, although dwarfed by double-digit growth two years ago, still came as good news for China, which is experiencing painful restructuring with major economic indicators losing steam.
"Looking forward, we expect continued gradual recovery in export demand going into the second half as the economic growth outlook perks up for the G3 in the second quarter, and the base effect of the commodity price free fall recedes in the fourth quarter," Liu said.
But an HSBC research note pointed out the mild improvement was not sufficient to suggest a meaningful recovery ahead.
"Although the U.S. economy is expected to rebound in the second quarter, we expect export outlook to remain challenging in the coming months, partly due to a strong currency," the note said.
Given a lukewarm global trade climate, HSBC has downgraded its 2015 export growth forecast for China from 7.1 percent to 4.2 percent.
Nevertheless, China's exports did perform better in May, but imports painted another picture.
Official data showed imports slumped 18.1 percent from a year ago to 803.33 billion yuan, dragging total foreign trade down by a 9.7-percent drop.
The decline extended the contraction from April's 16.2-percent drop, falling short of market expectations for a marginal improvement.
HSBC's note said the contraction widened even as commodity prices have started to stabilize, pointing to soft domestic demand.
China bought more bulk commodities of crude oil and grain in the first five months, but imports of iron ore, coal and refined oil products shrank, with prices of major goods down.
Imports of oil increased 4 percent year on year to 134 million tonnes, but iron ore lost 1.1 percent to 378 million tonnes, data showed.
Because of tumbling imports, trade surplus surged a substantial 65 percent to 366.8 billion yuan, with the figure for the first five months doubling to 1.33 trillion yuan.
"While trade surplus has been high so far this year, the contribution to GDP growth will be quite negligible. Meanwhile, poor export performance will continue to weigh on manufacturing investment, employment and firms' sentiment," the HSBC note said.
Qu said he continues to expect more monetary and fiscal easing measures in the coming weeks to stimulate domestic demand and prop up growth.
In the Jan.-May period, the country's exports increased 0.8 percent and imports decreased 17.2 percent year on year, with foreign trade volume down 7.8 percent, data showed.
Meanwhile, China's trade with the European Union, its biggest trade partner, waned by 7.1 percent, but that with the United States rose 2.8 percent. Its trade with the Association of Southeast Asian Nations edged down 0.5 percent, while that with Japan plummeted by 11.2 percent.