China posts a surprise trade deficit as exports slow

[IBRIS]

China posts a surprise trade deficit as exports slow

China has reported a surprise trade deficit for the first time since March last year, after exports slowed.

Shipments grew at a weaker-than-expected 2.4% in February from the same month a year ago, latest figures show.

Imports on the other hand increased by 19.4%, resulting in a trade deficit of $7.3bn (£4.5bn), the largest in seven years.

The news comes at a time when China has been facing criticism over its export-led growth policy.

Easing pressure
The US has led criticism of China, claiming it keeps the value of its currency, the yuan, artificially low so that it can boost foreign sales.

A weaker currency makes Chinese goods more affordable, giving the country's exporters an advantage over many competitors.

In recent years there have been repeated calls for China to let its currency appreciate against the US dollar.


Analysts say February's surprise deficit numbers may ease that pressure.

"A trade deficit offers relief to the international trade imbalance, and it may help to reduce pressure on the yuan to appreciate," said Wang Jianhui of Southwest Securities.

Mr Wang also said that as China works towards rebalancing its trade and increasing domestic demand, the slowdown in exports could continue in coming months.

"The Chinese government will be happy to see a modest trade deficit for a while," Mr Wang said.

Misfiring?
China's growth over the past years has been powered by its surging exports.

But as demand in its key markets such as the US and Europe has slowed, China has said it will focus on increasing domestic consumption in order to maintain economic growth.

However, analysts say that the latest numbers may point to deeper problems, not least the fact that domestic demand is not picking up as much as first hoped.

Imports are considered a good measure of domestic demand. In February, while they were expected to grow by more than 30%, they rose by 19.4%.

"It is definitely not a good sign," said Xu Biao of China Merchants Bank.

Mr Xu said that the latest figures may show that demand in mainland China is faltering.

"Imports have dropped significantly, and it points to a serious weakening in domestic economic activity," he said.

 

[Zeeshan360]

Nothing Surpising
As their premier said it alrdy tht China will be posting a trade deficit this year

 

[ChinaToday]

Very good news indeed that will ease the us pressure on china to do more on the currency issue

 

[IBRIS]

Nothing Surpising
As their premier said it alrdy tht China will be posting a trade deficit this year

They have list of expensive projects that would make it difficult for there overall statistics to stay on the top of the world.

 

[ChinaToday]

They have list of expensive projects that would make it difficult for there overall statistics to stay on the top of the world.

such as? and how above all any link?

 

[IBRIS]

such as? and how above all any link?

China Yuan Down Late; February Trade Deficit Surprises

SHANGHAI (Dow Jones)--China's yuan fell against the U.S. dollar late Thursday, as demand for the dollar from importers outweighed the Chinese currency's earlier gains after Beijing set a lower dollar-yuan central parity rate.

Data from China's customs showed an unexpected trade deficit in February, which dealers said could ease pressure for the yuan to appreciate more quickly.

On the over-the-counter market, the dollar was at CNY6.5747 around 0830 GMT, up from CNY6.5721 late Wednesday. It traded between CNY6.5693 and CNY6.5755.

At CNY6.5747 to the dollar, the yuan has risen 3.8% against the U.S. unit since June, when China effectively ended ...

 

[Zeeshan360]

Very good news indeed that will ease the us pressure on china to do more on the currency issue

I nvr thought this issue was so big . Even bigger than that of u r Economy

 

[IBRIS]

such as? and how above all any link?

Is China's economy slowing too fast?

NEW YORK (CNNMoney) -- It's starting to look as if everybody's worst fears about China's economy may finally be coming true. China is slowing down.
But how severe will the pullback be? And is it only temporary? That's up for debate.

G-20 nations at a glance



China reported sluggish auto sales figures for February on Wednesday morning. According to the China Association of Automobile Manufacturers, sales of passenger vehicles were up less than 3% from a year ago.

One reason for the slowdown is that tax breaks for small cars expired at the end of last year. But the anemic pace of growth may continue.

Economists from Barclays Capital noted in a report Wednesday that "with borrowing costs rising and credit availability falling, the fuel for rising automobile demand is running low" throughout Asia.

The economists added that weakness could be most pronounced in China and India since their central banks are raising rates to combat inflation.
If oil prices remain above $100 a barrel for an extended stretch, that could only make matters worse. And that may eventually be bad news for the likes of General Motors (GM) and Ford (F, Fortune 500). (Their Chinese sales did rise in February though.)
China's auto sales news comes only a few days after the Chinese government disclosed that it was targeting an economic growth rate of 7% a year for the next five years.
Emerging markets are hot. Place your bets.

That, of course, is still robust growth -- even if it is considerably lower than the double-digit percentage gains that China's economy has been growing at for the past few years.

"China is not immune to business cycles. But slowing the trajectory of growth is not the same as saying the economy is going to decline," said Art Steinmetz, chief investment officer at OppenheimerFunds Based in New York.

Still, there is reason to be worried that China's economy may be cooling even more quickly than people expected.
Optical networking equipment maker Finisar (FNSR), which had been one of the hottest stocks this year due in part to hopes for strong growth in China, stunned investors Tuesday evening with a weak outlook for the current quarter.

Finisar said in its earnings report that "a slowdown in business in China overall" was a key reason for its tepid forecast.

Shares of Finisar plunged nearly 40% Wednesday on the news, dragging down other networking equipment companies with a big presence in China, like JDS Uniphase (JDSU) and Ciena (CIEN).

If more Chinese telecoms and tech firms start to rein in spending, that's not good news. It goes without saying that a healthy Chinese economy is key to keeping the U.S. and global recovery on track.

China is now officially the second-largest economy in the world. Big U.S. firms such as KFC owner Yum! Brands and Caterpillar (CAT, Fortune 500) are doing more business there. China is the largest foreign holder of U.S. Treasury debt.
We need China even if we sometimes don't agree with or understand everything their government does.
0:00 /2:42China's economy blazes ahead of Japan
And the biggest problem right now is that China can't afford to be lax about inflation risks. That likely will mean more monetary tightening to slow growth further -- even as the Federal Reserve seems intent on keeping rates near zero for the foreseeable future.

"Excess liquidity is already feeding property bubbles, commercial and residential, in certain cities," wrote Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, Scotland in a report this week.
He noted that China is acting aggressively. There have been eight increases to bank reserve ratio requirements and three interest rate hikes in the past few months. But China probably has only just begun to tighten.

"The latest data still suggest that the authorities are behind the curve, and have more to do," Milligan wrote.
China's 'insatiable' demand brings inflation risk

Despite these fears, it's worth remembering that China is clearly not on the verge of a 2008-style economic collapse. In addition, China's economy often tends to hit a soft patch around the Lunar New Year holiday.
So what may look bad now could turn out to be just the standard Chinese New Year slowdown. That appears to be what semiconductor giant Texas Instruments (TXN, Fortune 500), a leading supplier of chips for phones in China, is banking on.
"We typically expect to see some noise around the Chinese New Year, and that was no exception this year," said Ron Slaymaker, head of investor relations for Texas Instruments, during a conference call with analysts Tuesday.
Slaymaker added that demand did dip in early February but strengthened later in the month. But he conceded that sales in Asia overall, including Japan, are likely to cool when compared to the U.S. and Europe.
Still, even if China's growth slows, the bigger concern would be what might happen if China doesn't go far enough to keep pricing pressures in check. The consequences of China losing the battle with inflation would be far worse than annual growth slowing from 10% to 7%.

"We're not worried about a hard landing in China. We're worried about China hardly landing," Steinmetz said.

 

[huzihaidao12]

Chinese New Year, many workers do not work.

 

[IBRIS]

Chinese New Year, many workers do not work.

China trade swings to largest deficit in 7 years

(Reuters) - China swung to a surprise trade deficit in February of $7.3 billion, its largest in seven years, as the Lunar New Year holiday dealt an unexpectedly sharp blow to exports.

It was China's first trade deficit since March last year and its biggest since February 2004. Economists, who had forecast a small surplus of $4.95 billion, said the sudden drop was likely to prove temporary.

"We did expect exports to slow last month, but I think nobody had expected such a weak outcome," said Nie Wen, an analyst at Hwabao Trust in Shanghai.

"There is little chance that China will have a trade deficit again, and the monthly trade surplus may pick up in the second half of this year," he added.

Still, the extent of the slowdown in both exports and imports caught markets by surprise. Asian stocks tumbled on worries that monetary tightening in China and other emerging markets was taking a real chunk out of economic growth.

The deficit will at least be welcome news on two fronts for the Chinese government, helping it dampen inflationary pressure and deflect calls for faster yuan appreciation.

Cash inflows from the country's vast trade surplus over the past few years have been a root cause of China's recent run-up in prices.

Inflation reached a 28-month high of 5.1 percent in the year to November. Data due on Friday is expected to show it pulled back to 4.7 percent in February.

With tightening policies beginning to have an impact, China is confident that it can achieve its 2011 goal of holding inflation to an average of 4 percent this year, Ma Jiantang, the government's statistics chief, said on Thursday.

His comments followed a report in an official newspaper that bank lending in February was much less than expected, indicating that Beijing has scored some success in reining in credit issuance, a crucial part of its campaign to control inflation.

Until that number is confirmed, though, attention will be squarely on China's precipitous drop in exports.

China exports grew 2.4 percent in February from a year earlier, the customs agency said on Thursday, well short of forecasts for a rise of 26.2 percent.

Imports increased 19.4 percent, missing market expectations of a 32.3 percent increase.

The data hit markets when investors are already worried that high oil prices will undermine global growth. Japan's Nikkei stock average .N225 fell 1.5 percent and stocks elsewhere in Asia .MIAPJ0000PUS slid 1.4 percent.

"It's come on a day when commodity prices are off, and investors are worried about global growth and it's just accentuated the market pullback," said Shane Oliver, head of investment strategy at AMP Capital Investors.


"The Lunar New Year does heavily distort Chinese trade data and I'll be inclined not to read too much into it. But the market is obviously feeling nervous and has probably read a bit more into it."

HOLIDAY EFFECT

The government has in the past pointed to a narrower trade surplus as evidence that it is making headway in tilting China away from excessive reliance on exports, a shift that is seen as a crucial part of putting the global economy on firmer footing.

But many economists cautioned against reading too much into one month's trade data, especially in the first quarter.

Chinese exports typically slump at the start of the year, with the country's factories shut or running at half speed for weeks because of China's New Year holiday, which this year fell in the first week of February.

"We believe the trade deficit is likely to be a temporary phenomenon distorted by the Lunar New Year. During the several weeks following the Lunar New Year, the holiday distortions affect exports much more than imports because exporters have a much greater tendency to take extended holidays," Yu Song and Helen Qian, economists with Goldman Sachs, said in a note.

Yet the holiday effect had been expected to weigh on exports when analysts made their initial forecasts, so some said that the downside disappointment in the data was, in fact, a worry.

"Both imports and exports are lower than expected, and seasonal factors alone can't explain the sharp monthly drop," said Xu Biao, economist with China Merchants Bank in Shenzhen.

"It is definitely not a good sign. The size of imports is already read as a measure of domestic demand. But now imports have dropped significantly, and it points to a serious weakening in domestic economic activity," he said.

CONTROLLING FOR HOLIDAY

Because of distortions caused by the Chinese New Year, some analysts prefer to look at data for January and February together.

On that combined basis, exports rose 21.3 percent from a year earlier and imports increased 36.0 percent, both of which were faster than December's pace.

The average trade balance for the first two months of 2011 was a $0.4 billion deficit, far below the monthly average of a $15 billion surplus last year.

"We look at January and February together. On that basis, growth is still quite healthy. We were expecting exports and imports to slow this year due to weak external demand, so this is line with that," said Tao Wang, chief China economist for UBS.

With import growth set to outpace export growth, China was hoping to narrow its trade surplus for the third straight year, Commerce Minister Chen Deming said earlier this week. China's trade surplus was $183 billion last year, down from $196 billion in 2009 and a record $295 billion in 2008.

Chen also said that the yuan was on "a gradual upward trend," but that there was no reason for it to move any faster. Although the yuan has been running near record highs against the dollar, it has only appreciated about 4 percent since being depegged last June.

(Additional reporting by Langi Chiang and Aileen Wang; Writing by Simon Rabinovitch; Editing by Ken Wills)
China trade swings to largest deficit in 7 years | Reuters

 

[Chinese-Dragon]

Good news.

The "cooling down" of the economy is showing results.

The next few months will probably show a surplus though, since "February" was Chinese New Year.

We will have to wait for data from the following months to see if the pattern holds.

 

[huzihaidao12]

Chinese New Year, many workers do not work. The Chinese government has stepped up measures to boost domestic demand and strengthening to imports.

Comparison of accuracy depends March data. If there are no other new thing, I think enough to say.

 

[huzihaidao12]

Chinese New Year, in January last year, this year in February.

 

[anon45]

not suprising with the rising cost of oil raising the cost of food and everything else. Hurts those importing, hurts those exporting. Might be a trade deficit in March as well...

 

[BigTree.CN]

If China was slowing down fast, then congratulations to our Indian fellows. You can take the lead and be the next world factory. I remember there was a time when Indian members in an Indian forum talking about how to attract the manufacturing industry from China to India, now it is the perfect time to do so, I guess.