BEIJING - A possible slowdown in China's growth in exports last month is a direct result of weaker demand in the United States and mounting pressure on Chinese manufacturers, according to an economist.

The government is scheduled to announce its May trade figures on Friday. A report released by Goldman Sachs estimates that export growth dropped to 20 percent year-on-year, down from 29.9 percent in April, while import growth is expected to rise from 21.8 percent in April to 26.9 percent year-on-year.

Experts estimate the slowdown may continue in the second half of the year. Peter Pak, executive director of BOCI Research Ltd, an investment research firm, said trade figures are expected to slow down in May as a result of a shrinking demand from both the US and Europe, which are showing some negative signs in their economic recoveries, and from the Chinese government's tightening policies adopted last year.

Li Quan, deputy director of school of International Trade and Economics at Peking University, said rising labor and raw material costs, coupled with a stronger yuan, have also contributed to the slowdown in China's exports last month.

"Chinese enterprises are still weak in deciding prices in the US market, as most goods exported to the US are intensive-labor products. The transfer of low-end manufacturing businesses is the trend," Li said. "China faces intense competition from low-cost countries such as Russia, Indonesia, Vietnam and Brazil."

As a result, many US companies working at lower labor costs and lower product prices are increasingly moving their production and orders to Vietnam and neighboring countries, away from China.

At the same time, a stronger yuan has squeezed export revenues by pushing up prices and fueling inflation, which is also affecting export growth.

But Li feels that the slowdown in exports will alleviate pressure on the yuan.

The yuan has gained more than 5 percent over the past 12 months against the US dollar, less than half the rise of Singapore's dollar.

But US policymakers have pressed China to allow quicker gains in the yuan to help narrow trade imbalances, with Treasury Secretary Timothy Geithner continuing to describe the currency as "substantially undervalued" and as a currency that is putting other countries at a competitive disadvantage.

According to Chinese Customs statistics, China registered a deficit of $1.2 billion in the first quarter, but it bounced back in April with a trade surplus of $11.42 billion. It's estimated to be $130 billion this year, substantially lower than the $184.5 billion recorded in 2010.

China Daily