China reported its biggest trade deficit since at least 1989 in February as Europe’s debt crisis crimped exports and imports rebounded after a weeklong holiday.
The shortfall was $31.5 billion, the customs bureau said on its website on Saturday. Imports rose 39.6 percent from a year earlier, after a 15.3 percent slump in January, while exports increased 18.4 percent, the bureau said. Data in the first two months are distorted by the timing of the Lunar New Year holiday, which fell in January this year and February in 2011.
On Saturday’s data, along with lower-than-forecast expansion in industrial output and retail sales reported yesterday, raise the odds PremierWen Jiabao will ease policies to support growth in the world’s second-biggest economy. Commerce minister Chen Deming’s warning this week that boosting trade by 10 per cent this year will require “arduous efforts” may also signal a slower pace of yuan gains as policymakers seek to aid exporters.
“Easing inflation and weakening economic activity send a strong signal for further loosening in the upcoming months,” said Shen Jianguang, Hong Kong-based chief greater China economist for Mizuho Securities Asia Ltd who previously worked for the International Monetary Fund and European Central Bank.
The government is likely to cut banks’ required reserves in March, the third reduction in four months, while appreciation in the yuan will be “difficult,” Shen said.
Weaker yuan
China has allowed its currency to weaken against the dollar this year, aiding exporters, as Europe’s sovereign-debt turmoil clouds the outlook for overseas sales. Chen, speaking to reporters March 7, said the yuan exchange rate is in a reasonable range.
The nation may “appropriately” widen the yuan’s trading band to better reflect market supply and demand, People’s Bank of China Governor Zhou Xiaochuan said, according to a March 5 report by the official Xinhua News Agency.
The deficit was the first in a year and largest in data compiled by Bloomberg going back to 1990. The previous record shortfall during that time was $7.87 billion in February 2004. It compared with the median estimate for a $5.35 billion deficit in a Bloomberg News survey of 28 economists. Analysts forecast a 31.1 per cent gain in exports from a year earlier and a 31.8 per cent increase in imports.
Some analysts lowered estimates for export growth after Chen said March 7 that outbound shipments rose about seven per cent over the first two months of the year, a figure confirmed in on Saturday’s release. Nomura Holdings Inc forecast a gain of 18.7 per cent, while Societe Generale SA projected 18 per cent.
Seasonal adjustments
The relatively fast nominal growth in trade resulted from the timing of the Lunar New Year, the customs bureau said. Including seasonal adjustments, exports in February rose four per cent from a year earlier while imports gained 9.4 per cent, it said.
Asian stocks gained yesterday on speculation China’s government will take steps to boost growth. The MSCI Asia Pacific Index rose 0.7 per cent, while China’s benchmark Shanghai Composite Index increased 0.8 per cent. The yuan rose 0.09 per cent to 6.3107 against the dollar.
February exports totaled $114.5 billion, while imports were $146 billion. China’s shipments to the US climbed 22.6 per cent from a year earlier to $19.4 billion after a 5.4 per cent gain the previous month, the data show. Imports from the US jumped 43.4 per cent to $11 billion.
Overseas sales to the European Union, China’s biggest market last year, rose 2.2 per cent to $19.4 billion, after a 3.2 per cent drop in January.
Copper imports
Imports of copper by China last month were the second-highest on record, the data showed, after the weeklong holiday slowed customs clearance in January.
Net crude oil imports increased to a record to meet rising demand as farmers prepare for the planting season and the government adds to emergency stockpiles. The average price of February’s crude imports was $112.39 a barrel, up from $92.28 in the same month last year, according to Bloomberg calculations.
Wen, in his state-of-the-nation work report to lawmakers at the National People’s Congress this week, said the government will “carry out timely and appropriate anticipatory adjustments and fine-tuning” of fiscal and monetary policies.
Suntech Power Holdings Co, the largest maker of solar panels, said increased competition and government subsidy cuts will lead to a first-quarter drop in shipments, according to a statement March 8 from the Wuxi, China-based company. Deliveries in the first quarter will decline by about 30 percent from the fourth quarter, it said.
The nation will still see a sizable trade surplus for the full year, as the deficit early in 2012 is largely seasonal, according to Song Yu, a Beijing-based economist with Goldman Sachs Group Inc.
