China reports its biggest trade deficit in at least a decade


China reported a trade deficit of US$31.5 billion last month, the first since February 2011 and the biggest in at least a decade as imports increased faster than exports.
Mainly due to a lower comparative base distorted by the Spring Festival holiday, which was in January this year but February the year before, both exports and imports in the world's second-largest economy staged a strong comeback last month from the drop one month earlier.
Exports expanded 18.4 percent year on year to US$114.4 billion in February, recovering from the retreat of 0.5 percent in January. Imports surged 39.6 percent to US$145.9 billion, rebounding from a slump of 15 percent in January.
The General Administration of Customs released the data yesterday and said taking seasonal factors into consideration, export and import growth in February should be 4 percent and 9.4 percent, respectively.
The results were welcomed by economists after China reported on Friday a notable slowdown in other key economic data including industrial production, fixed-asset investment and retail sales in the first two months.
"Trade performed better than expected and thus eased pressure for the government to release growth-supportive policies," said Xue Jun, an analyst at CITIC Securities Co. "If exports can continue such growth momentum, it may delay cuts in the reserve requirement ratio."
Li Maoyu, an analyst at Changjiang Securities Co, said such a big trade deficit may also slow the appreciation of the yuan.
"It's not rare for China to report a trade deficit in February but it's very uncommon for the country to register such a large trade deficit," Li said. "It will weaken claims by some other countries that the value of the yuan gives Chinese export firms an unfair advantage."
China may "appropriately" widen the yuan's trading band to better reflect market supply and demand, Zhou Xiaochuan, governor of the People's Bank of China, said this month during the annual session of the National People's Congress, fanning speculation the yuan will appreciate at a faster pace.
Also at the NPC meeting, Commerce Minister Chen Deming said China will likely reach its 10 percent trade growth target this year, but that it will be difficult.
In the first two months, China's trade expanded 7.3 percent from a year earlier to US$533 billion with a deficit of US$4.2 billion.
Trade with the debt-stricken European Union improved by an annualized growth of 4.7 percent between January and February, and deals with the United States also increased 9.2 percent. Both were negative in January, Customs data showed.
China's trade with emerging markets improved as shipments with Russia surged 31.9 percent in the first two months.
Shanghai's trade rose 6.9 percent on an annual basis to US$63.7 billion between January and February.

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