China’s trade surplus fell to its lowest in nine months last month after imports surged, supporting the government’s case ahead of a G20 meeting that it is doing enough to spur domestic demand without speeding up currency appreciation.
The trade surplus shrank to US$6.5 billion from US$13.1 billion in December, well short of forecasts for a US$10.7 billion gap.
Global stocks and commodity prices climbed higher, with the surprisingly strong imports highlighting China’s massive appetite for raw materials and its solid export growth hinting at solidifying recoveries in the US and European economies.
In the past, a weaker surplus would have caused concern for the Chinese government, but it has been trying to shift the economy toward greater reliance on consumption and less on exports, in part to address critics who say that its success has come at the expense of other countries.
It was the third consecutive month of a declining trade surplus and though not enough to mark a definitive change, that streak provides an important symbolic lift to China before a G20 meeting this week of finance ministers from the world’s biggest developed and developing economies.
China’s imports rose 51 percent last month from a year earlier, blowing past market forecasts for a 28 percent rise. Exports rose 37.7 percent last month, topping expectations for a 22.4 percent rise, the customs administration said.
“There tends to be a seasonal pattern and there is generally a decline in the trade surplus at the beginning of the year,” said Jian Chang, an economist with Barclays Capital in Hong Kong. “Exports tend to be weak in the first quarter, while there is no such pattern in imports.”
Iron ore prices edged up further to fresh highs after the data, which showed that China was building steel product stockpiles in anticipation of more demand. Asian stocks rallied, snapping five straight sessions of losses.
Yu Song (宋玉) and Helen Qiao (喬虹), economists at Goldman Sachs, said that the import and export growth reflected well on both the Chinese and global economy.
“The strong exports growth momentum is supported by improvements in economic conditions in China’s major trading partners, and strong imports growth momentum is supported by strong domestic demand growth,” they wrote in a note. “Besides, the rise in imported commodity prices likely contributed to strong imports data as well.”
Copper and iron ore prices ran near record highs for much of last month and oil was also costly, pushing up China’s import bill.
Commodity-exporting countries were the clear beneficiaries. Imports from South Africa were up 212.5 percent year on year, while shipments from Canada and Brazil were up 146.7 percent and 95.4 percent, respectively.
However, economists also cautioned against reading too much into last month’s data, because trade performance was probably affected by the Lunar New Year. It fell earlier this year than last year, leading firms to rush to make shipments and order goods in the final weeks of last month before the holiday.
Along with serving as a signal of economic rebalancing, a smaller trade surplus also means that less money is rushing into China, easing the upward pressure on prices that has pushed inflation to its fastest rate in more than two years.
China will report its inflation data for last month today. Analysts polled by Reuters had expected prices to rise 5.3 percent in the year to last month, a 30-month high, but traders said yesterday that the increase was likely to be 4.9 percent, because adjustments of the consumer price index will have reduced the weight given to fast-rising food prices.
The combination of slower inflation and a narrower trade surplus will embolden Chinese officials who have resisted faster currency appreciation.
The yuan has risen 3.5 percent against the US dollar since it was depegged in June last year, but it has been largely level this year.
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