China’s imports surged at an all time high in 10 years in May and this is primarily because of the increase in the demand for raw materials. Meanwhile, the export growth came down amid disruptions caused by COVID-19 cases at the country’s major southern ports.

A recovery in developed markets has skyrocketed the demand for Chinese products, a global semiconductor shortage, higher raw material and freight costs, logistics bottlenecks and a strengthening yuan have dimmed the outlook for the world`s largest exporting nation.

China’s exports in dollar terms in May grew 27.9% as against last year, slower than the 32.3% growth reported in April.

“Exports surprised a bit on the downside, maybe due to the COVID cases in Guangdong province which slowed down the turnover in Shenzhen and Guangzhou ports,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, adding that turnover at ports in Guangdong will likely remain slow in June.

Big shipping companies asked clients of worsening congestion at Shenzhen`s Yantian port in Guangdong province after getting to know about several cases among port staff.

In Guangdong, factories are yet to reveal widespread capacity cuts over the outbreak but admitted efficiency issues as they tried to meet overseas demand.

Chen Linsheng, chief operating officer at Anlan, a Shenzhen-based manufacturer of skincare and beauty-care devices, told Reuters while there was no impact on production, staff are now subject to a series of COVID tests and not allowed back into the factory without a negative result.

“We are not allowed to go out (of the city). We need to report in advance and cannot even go to Guangzhou or Foshan on our own,” said Chen, adding that a lot of meetings have moved back online.

Besides the impact of COVID cases in Guangdong, the global chip shortage has started to hit all of China’s export items related to semiconductors, said Iris Pang, Greater China chief economist at ING.

For example, auto processing products and parts, the biggest export item, fell 4% from a year earlier, Pang added.

The average growth for exports dropped to 23.4% in May from 36.3% in April, which hints towards the weaker export momentum of personal protective equipment (PPE) and work-from-home (WFH) products.

At the same time, the currency’s extended rally in recent weeks to near three-year highs against the dollar could further saddle US consumers with higher prices.