China Records Its first trade deficit in three years

China sees first trade deficit in 3 years

trade deficit

Due to the unexpected surge in import, February saw a 60.36-billion-yuan ($8.7 billion) deficit in yuan-denominated trade, the first for China since February 2014, according to statistics released by China’s General Administration of Customs on Wednesday.

trade deficitImport in February witnessed a 44.7-percent year-on-year growth, higher than the expected 23.1 percent and the 25.2 percent in the previous month.

Export in the same month saw a 4.2 percent year-on-year growth, lower than the expected 14.6 percent and the 15.9 percent in the previous month.

Analysts attributed the trade deficit to booming domestic demand, the Spring Festival holiday and rise in commodity price.

Wang Jingwen, analyst with a research center under China Minsheng Bank believed that one reason for the significant import increase in February is that the Chinese economy is still recovering.

Leading indicators such as PMI, heavy truck, excavator and freight volume also show the increase in market vitality, validating the booming internal demand, he added.

The trade deficit in February is related to the significant raise in import volume brought by rising commodity price, said Zhang Yongjun, a researcher at the China Center for International Economic Exchanges.

In the first two months of 2017, the price of imported iron ore grew by 83.7 percent. Crude oil price was up by 60.5 percent, coal price 110 percent and refined oil price 48.6 percent.

Deng Haiqing, Chief Economist with JZ Securities said that Chinese enterprises would export its products before the Spring Festival to cut down cost on storage, leading to the export surge before the Spring Festival and the import surge after the holiday.

Deng predicted that when the Spring Festival factor cools down, the trade margin would return to normal. March is very likely to see a trade surplus, which is basically in line with the prediction of Goldman Sachs.

Regarding the assertion that trade deficit will lead to devaluation of the RMB, experts pointed out that trade deficit is not sustainable, thus posing limited impact on the RMB exchange rate.

The pressure on RMB devaluation is expected to be gone judging from the data on foreign exchange reserve, they explained.

By Qiang Wei from People’s Daily/

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