Surprise trade surplus called bad sign
By Wang Yanlin |
April 11, 2012, Wednesday
|
Print Edition
Print Edition
China posted a surprise trade surplus in March, but it came on the back of a sharp slowdown in imports that signals sagging demand for the raw materials used in industrial production.
In the latest month, exports rose 8.9 percent from a year earlier to US$165.6 billion, compared to growth of 18.4 percent in February, the General Administration of Customs said yesterday. Imports gained 5.3 percent to US$160.3 billion, slowing from a 39.6 percent surge a month earlier.
That created a trade surplus of US$5.3 billion, turning from a February deficit of US$31.5 billion, the first deficit in a year and the largest in a decade.
"The data showed a grim trade outlook," said Xue Jun, an analyst at CITIC Securities Co. "Both exports and imports eased more than expected, imports in particular."
Market watchers had forecast a trade deficit of about US$9 billion due to slower export growth to major markets in the US and Europe.
The trade figures yesterday, coupled with stronger-than-expected inflation figures on Monday, seem to put the Chinese government's economic strategy in a bind, analysts said.
"Although there were signs of a stronger manufacturing sector in China last month, demand among producers was declining amid an economic slowdown, and it explained the slowing imports," said Yao Wei, an economist at Societe Generale.
The official Purchasing Managers' Index released on April 1 hit a one-year high of 53.1, indicating China's manufacturing activity was expanding. By comparison, the HSBC China Manufacturing Purchasing Managers' Index, which is slanted toward private and exported-oriented companies, stood at 48.3 last month, a sign that activity is slowing. The HSBC index has been losing ground at the second-fastest pace in three years.
"The trade data showed China needs more stimulus to spur domestic demand to sustain growth," said Tang Jianwei, an analyst at Bank of Communications. He said the central bank may reduce the banks' reserve requirement ratio one more time this month to loosen up money in the banking system.
However, other economists argue that China should be cautious about relaxing policies just now because the Consumer Price Index for March rebounded slightly more than expected to 3.6 percent.
The trade surplus may add to pressure for the yuan to be strengthened - a process that stalled after China reported a trade deficit in February, Tang said. The appreciation of the yuan would make it even harder for exporters but could help importers reduce costs.
Boosting imports is a key component in China's economic strategy of balancing trade and reducing the cost of buying the overseas raw materials needed to stoke industrial growth. Last month, the country announced a cut in import duties on some commodities, expansion of financing channels for importers and a streamlining of the regulatory process related to imported goods.
Those efforts have yet to bear fruit, analysts said.
In the first quarter, China's trade expanded 7.3 percent to US$859.3 billion and showed a surplus of US$670 million, Customs said yesterday.
Shanghai trade rose 3.8 percent to US$102.4 billion.
In the latest month, exports rose 8.9 percent from a year earlier to US$165.6 billion, compared to growth of 18.4 percent in February, the General Administration of Customs said yesterday. Imports gained 5.3 percent to US$160.3 billion, slowing from a 39.6 percent surge a month earlier.
That created a trade surplus of US$5.3 billion, turning from a February deficit of US$31.5 billion, the first deficit in a year and the largest in a decade.
"The data showed a grim trade outlook," said Xue Jun, an analyst at CITIC Securities Co. "Both exports and imports eased more than expected, imports in particular."
Market watchers had forecast a trade deficit of about US$9 billion due to slower export growth to major markets in the US and Europe.
The trade figures yesterday, coupled with stronger-than-expected inflation figures on Monday, seem to put the Chinese government's economic strategy in a bind, analysts said.
"Although there were signs of a stronger manufacturing sector in China last month, demand among producers was declining amid an economic slowdown, and it explained the slowing imports," said Yao Wei, an economist at Societe Generale.
The official Purchasing Managers' Index released on April 1 hit a one-year high of 53.1, indicating China's manufacturing activity was expanding. By comparison, the HSBC China Manufacturing Purchasing Managers' Index, which is slanted toward private and exported-oriented companies, stood at 48.3 last month, a sign that activity is slowing. The HSBC index has been losing ground at the second-fastest pace in three years.
"The trade data showed China needs more stimulus to spur domestic demand to sustain growth," said Tang Jianwei, an analyst at Bank of Communications. He said the central bank may reduce the banks' reserve requirement ratio one more time this month to loosen up money in the banking system.
However, other economists argue that China should be cautious about relaxing policies just now because the Consumer Price Index for March rebounded slightly more than expected to 3.6 percent.
The trade surplus may add to pressure for the yuan to be strengthened - a process that stalled after China reported a trade deficit in February, Tang said. The appreciation of the yuan would make it even harder for exporters but could help importers reduce costs.
Boosting imports is a key component in China's economic strategy of balancing trade and reducing the cost of buying the overseas raw materials needed to stoke industrial growth. Last month, the country announced a cut in import duties on some commodities, expansion of financing channels for importers and a streamlining of the regulatory process related to imported goods.
Those efforts have yet to bear fruit, analysts said.
In the first quarter, China's trade expanded 7.3 percent to US$859.3 billion and showed a surplus of US$670 million, Customs said yesterday.
Shanghai trade rose 3.8 percent to US$102.4 billion.
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