Import surge sends China trade to decade-deep deficit

Mon Mar 12, 2012 9:39am EDT
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By Nick Edwards and Koh Gui Qing

BEIJING (Reuters) - China's trade balance plunged $31.5 billion into the red in February as imports swamped exports to leave the largest deficit in at least a decade and fuel doubts about the extent to which frail foreign demand or seasonal distortion drove the drop.

Import growth of 39.6 percent on the year in February was the strongest in a year, well ahead of the 27 percent expected and more than twice the rate of export growth of 18.4 percent that was barely more than half the pace forecast -- albeit at a six month high.

"It's a very mixed picture," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong, who cautioned against reading too much into the data given the underlying volatility caused by the Chinese Lunar New Year holiday that saw a week-long factory shut down in January 2012 and February last year.

By Zhang's calculations that adjust for days worked and exclude the volatility of the 2008/09 financial crisis, exports appear to have posted one of their lowest month-on-month growth rates since the mid 1990s.

"But there is a bright spot in that imports, particularly imported components for export purposes, were weak in January but became a bit better in February. My expectation is that March and April exports will pick up a bit from this level," he told Reuters.

Economists at HSBC had warned clients to brace for a deficit as large as $28 billion. The market consensus had been for a deficit of $4.9 billion.

Analysts polled by Reuters say Lunar New Year distortions mean investors should combine January and February data to better gauge the trend.

Some forewarning of the data earlier in the week came from Commerce Minister Chen Deming, who told a news conference on Wednesday that the value of imports and exports in January and February combined had increased by about 7 percent.   Continued...

A woman rides her motorcycle past shipping containers at the Port of Shanghai February 10, 2011. REUTERS/Aly Song