China Unexpectedly Reports Trade Surplus
China reported an unexpected trade surplus last month as import growth trailed forecasts, underscoring risks of a deeper slowdown in the world’s second- largest economy.
Inbound shipments increased 5.3 percent, the customs bureau said today, below the 9 percent median estimate in a Bloomberg News survey. Exports rose 8.9 percent from a year earlier, more than forecast, leaving a trade surplus of $5.35 billion, compared with a median projection for a $3.15 billion trade deficit.
Premier Wen Jiabao may need to balance gains in external demand with a slowdown in domestic consumption in deciding whether to add monetary or fiscal stimulus. The improving U.S. economy and stabilizing European debt crisis stand to boost China’s exports in coming months. Commerce Minister Chen Deming said in March that foreign trade will probably improve in the second half.
“A slowdown in imports seems to suggest continued weakening in domestic demand,” said Joy Yang, chief economist for Greater China at Mirae Asset Securities (HK) Ltd., who previously worked for International Monetary Fund.
The trade surplus may delay any additional cut in the required reserves banks must hold, while a slump in imports and the domestic economy call for an interest-rate cut to support growth, a move that’s likely to happen around midyear as inflation drops, Yang said.
The benchmark Shanghai Composite Index maintained losses following the report, trading 1 percent lower at the 11:30 a.m. local-time break.
February Deficit:
China reported a trade deficit of $31.5 billion in February, its first shortfall in a year and the biggest since at least 1989, as Europe’s debt crisis crimped exports and imports rebounded after a weeklong Chinese holiday.
The median forecast in a Bloomberg News survey of 29 economists was for a 7 percent gain in exports from a year earlier, after an 18.4 percent increase in February. Import growth, which compared with a 9 percent median estimate, slowed from 39.6 percent the previous month.
Speaking in southern China last week, Wen pledged to take measures including export tax rebates to ensure “steady growth” in trade this year and aid exporters hit by rising costs and weak demand, state media reported.
At the same time, the government is taking measures to stimulate imports and reduce the trade surplus that amounted to $155 billion last year. The State Council announced on March 30 cuts in import duties on some commodities and daily necessities.
Emerging-Market Exports:
China is countering a slowdown in exports to Europe by boosting sales to emerging markets. Carmakers including Geely Automobile Holdings Ltd. and Chery Automobile Co. will probably boost overseas shipments by about 50 percent this year, according to a February forecast from the China Chamber of Commerce for the Import & Export of Machinery & Electronic Products.
The yuan had its first quarterly decline since December 2009 in the first three months of 2012, sliding 0.06 percent to close at 6.2980 per dollar March 30 in Shanghai, according to the China Foreign Exchange Trade System.
Inflation rose a more-than-forecast 3.6 percent in March as gains in food prices quickened, the statistics bureau reported yesterday. The rebound may limit Wen’s scope for policy loosening, according toSong Yu, a Beijing-based economist with Goldman Sachs Group Inc.
China can pursue a “moderately loose” fiscal policy as growth slows yet can’t “substantially” ease monetary policy because of inflation, Tang Min from the Counsellors’ Office of the State Council said in today’s People’s Daily, the Communist Party’s mouthpiece.
Inbound shipments increased 5.3 percent, the customs bureau said today, below the 9 percent median estimate in a Bloomberg News survey. Exports rose 8.9 percent from a year earlier, more than forecast, leaving a trade surplus of $5.35 billion, compared with a median projection for a $3.15 billion trade deficit.
Premier Wen Jiabao may need to balance gains in external demand with a slowdown in domestic consumption in deciding whether to add monetary or fiscal stimulus. The improving U.S. economy and stabilizing European debt crisis stand to boost China’s exports in coming months. Commerce Minister Chen Deming said in March that foreign trade will probably improve in the second half.
“A slowdown in imports seems to suggest continued weakening in domestic demand,” said Joy Yang, chief economist for Greater China at Mirae Asset Securities (HK) Ltd., who previously worked for International Monetary Fund.
The trade surplus may delay any additional cut in the required reserves banks must hold, while a slump in imports and the domestic economy call for an interest-rate cut to support growth, a move that’s likely to happen around midyear as inflation drops, Yang said.
The benchmark Shanghai Composite Index maintained losses following the report, trading 1 percent lower at the 11:30 a.m. local-time break.
February Deficit:
China reported a trade deficit of $31.5 billion in February, its first shortfall in a year and the biggest since at least 1989, as Europe’s debt crisis crimped exports and imports rebounded after a weeklong Chinese holiday.
The median forecast in a Bloomberg News survey of 29 economists was for a 7 percent gain in exports from a year earlier, after an 18.4 percent increase in February. Import growth, which compared with a 9 percent median estimate, slowed from 39.6 percent the previous month.
Speaking in southern China last week, Wen pledged to take measures including export tax rebates to ensure “steady growth” in trade this year and aid exporters hit by rising costs and weak demand, state media reported.
At the same time, the government is taking measures to stimulate imports and reduce the trade surplus that amounted to $155 billion last year. The State Council announced on March 30 cuts in import duties on some commodities and daily necessities.
Emerging-Market Exports:
China is countering a slowdown in exports to Europe by boosting sales to emerging markets. Carmakers including Geely Automobile Holdings Ltd. and Chery Automobile Co. will probably boost overseas shipments by about 50 percent this year, according to a February forecast from the China Chamber of Commerce for the Import & Export of Machinery & Electronic Products.
The yuan had its first quarterly decline since December 2009 in the first three months of 2012, sliding 0.06 percent to close at 6.2980 per dollar March 30 in Shanghai, according to the China Foreign Exchange Trade System.
Inflation rose a more-than-forecast 3.6 percent in March as gains in food prices quickened, the statistics bureau reported yesterday. The rebound may limit Wen’s scope for policy loosening, according toSong Yu, a Beijing-based economist with Goldman Sachs Group Inc.
China can pursue a “moderately loose” fiscal policy as growth slows yet can’t “substantially” ease monetary policy because of inflation, Tang Min from the Counsellors’ Office of the State Council said in today’s People’s Daily, the Communist Party’s mouthpiece.
Courtesy: Bloomberg
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