China posts quarterly trade deficit

[SHASH2K2]

China posts quarterly trade deficit


NEW YORK (CNNMoney) -- For the first time in seven years, China reported a quarterly trade deficit, as imports soared to an all-time high.

Imports outweighed exports by $1.02 billion in the first three months of the year, China's government said Sunday. That's a stark contrast to the country's $13.01 billion surplus in the same period a year ago.

China's General Administration of Customs attributed the trade gap to rapid domestic growth, surging prices for food, energy and other raw materials, and a long vacation during Chinese New Year in February.

In March, Chinese exports outweighed imports by $140 million. That slight trade surplus comes after the country reported a $7.3 billion trade deficit in February, when exports were limited by the Chinese New Year.

Exports surged 35.8% over the prior 12 months, to $152.2 billion in March. Imports rose at a slightly slower, albeit still very fast-paced, rate of 27.3% to $152.1 billion.

But Carl Weinberg, an economist with High Frequency Economics in Valhalla, N.Y., wrote in a report Sunday that the first quarter deficit is "meaningless." He pointed out that the first quarter, with February and March in particular, are weak for trade.

Weinberg noted that last year, the first quarter surplus for China was the smallest, and that the surpluses were significantly larger in the final three quarters of the year.

China has been trying to combat inflation with a series of interest rate hikes. The country's central bank raised rates last Tuesday for the fourth time in six months.

Imports soared 32.6% from a year ago, to a record high of $400.66 billion. Meanwhile exports increased 26.5%, to $399.64 billion.

China is the world's second largest economy after the United States, but surpasses Uncle Sam as an export powerhouse.

For 11 of the past 12 months, China has exported far more goods than it imports -- a sore point for the U.S., as the world's largest economy grapples with a massive trade deficit.

Many U.S. government officials have criticized China for keeping its currency, the yuan. artificially low. A weaker yuan helps make Chinese goods exported to the U.S. cheaper.

Weinberg wrote that China may point to its deficit in the first quarter as evidence that it is no longer contributing to global trade imbalances. But he added that the U.S. and other developed nations are likely to continue calling for China to let the yuan appreciate more freely.

 

[Armand2REP]

When you have a 30% spike in the cost of oil, it will eat that trade surplus up real fast. Rapid domestic growth my butt.

 

[LETHALFORCE]

China has been cooking the books for a long time, they have reached the point where they cannot fake the numbers anymore. How can an economy go from claiming 10% growth to a defecit in one quarter(if the numbers were real)?? Now that China is showing signs of inflationary pressures the world will have to find a new cheap labor manufacturer.

 

[SHASH2K2]

When you have a 30% spike in the cost of oil, it will eat that trade surplus up real fast. Rapid domestic growth my butt.

Armand Increase in Oil price will affect all economies across the globe and its not china specific .I think it will affect al economies across the globe.

 

[LETHALFORCE]

Armand Increase in Oil price will affect all economies across the globe and its not china specific .I think it will affect al economies across the globe.

Increase in energy costs usually is passed on as an increase in price of the goods ,but if China increases prices of their exports they will be replaced by a cheaper alternative; or Nations will make the goods themselves.

 

[SHASH2K2]

/\/\/\ Thanks for the information . If I am correct price of oil will be same for almost all the countries, be it India , vietnam or Taiwan. Infact it should be smaller issue for chinese as they have invested much more us and have more stable supply of oils.May be I am wrong but I think price of oil is not main component of decrease in export . Rising salary and a strong yuan and less demand of china made goods maybe the reasons behind it .

 

[SHASH2K2]

China returns to trade deficit in Feb. on slow exports

BEIJING--China said Thursday it had returned to a trade deficit in February for the first time in nearly a year, as the world's number two economy tries to wean itself off reliance on exports.
The trade deficit of US$7.3 billion — the country's first since March 2010 and only the second in nearly seven years — compared with a surplus of US$6.45 billion in January, customs authorities said in a statement.
China had a surplus of US$7.61 billion in February last year.
Customs blamed a sharp slowdown in exports on the Lunar New Year holiday, which fell in early February, while imports remained strong due both to increased shipments of oil and other commodities, and their rising prices.
Analysts however said the result was likely a blip on the radar screen that would not silence calls from abroad for a stronger yuan.
Exports rose just 2.4 percent in February from a year earlier to US$96.74 billion and imports gained 19.4 percent to US$104.04 billion. Analysts had expected a February surplus of US$3.9 billion, according to Dow Jones Newswires.
In January, exports rose 37.7 percent while imports grew 51 percent.
Analysts said exports and imports typically see strong growth ahead of the festive season when factories crank up production to meet demand, and then slow in the following month.
"This is not a big surprise," UBS economist Wang Tao told AFP, adding that the trade deficit would be "temporary" because China tends to import more at the beginning of the year.
"Exports tend to be very strong at the end of the year," she said, adding that the data would not dampen calls from China's key trade partners in the United States and Europe for a stronger currency.
Morgan Stanley economist Wang Qing said the combined January and February trade data better reflected the "big picture," showing exports grew 21.3 percent year-on-year and imports were up 36 percent.
The combined two-month trade deficit stood at US$890 million, customs authorities said.
Investors reacted negatively to the new data, with the Shanghai Composite Index down 1.26 percent at 2,964.40 in early afternoon trade.
Commerce Minister Chen Deming warned this week China could return to a trade deficit this year, noting "many international uncertainties" could hurt demand for exports.
"This year imports will grow at a rapid pace — faster than that of exports," Chen told reporters on the sidelines of the country's annual parliamentary session.
Premier Wen Jiabao said in his speech to open the annual session on Saturday that Beijing was aiming for a more balanced 8 percent growth in 2011 — a figure seen as key to staving off social unrest.
The country is targeting a slower-paced 7 percent growth over the 2011-2015 period, as China tries to move to a more sustainable growth path via higher domestic consumption and less reliance on exports and investment.
China recorded a hefty trade surplus of US$183.1 billion in 2010 compared with US$196.1 billion in 2009.
Beijing is under pressure to loosen its grip on the yuan, which critics say is grossly undervalued and gives its exporters an unfair trade advantage.
China's currency policy has been a thorn in the side of Sino-U.S. ties and will be a key issue for America's new ambassador to Beijing.

​

 

[LETHALFORCE]

/\/\/\ Thanks for the information . If I am correct price of oil will be same for almost all the countries, be it India , vietnam or Taiwan. Infact it should be smaller issue for chinese as they have invested much more us and have more stable supply of oils.May be I am wrong but I think price of oil is not main component of decrease in export . Rising salary and a strong yuan and less demand of china made goods maybe the reasons behind it .

This is even stranger when China is exporting a lot of electronics goods and electronic goods/semiconductors industry is in an upswing right now with where low inventory levels.

 

[SHASH2K2]

Anyone has details about which sector has been affected most and which country has imported less from china . That will be really interesting .

 

[Armand2REP]

Armand Increase in Oil price will affect all economies across the globe and its not china specific .I think it will affect al economies across the globe.

We aren't talking about other economies, we are talking about China's trade deficit in relation to its increased expenditure on oil imports. When you import 5.1 million barrels a day, a 30% spike in cost is going to mean billions in import cost over a month. China says it imports so much due to domestic growth... that is why it is domestic growth my butt.

 

[Ray]

I would be grateful if someone could explain what exactly China posts quarterly trade deficit means in layman's language and how does it affect the real world.

 

[SHASH2K2]

I would be grateful if someone could explain what exactly China posts quarterly trade deficit means in layman's language and how does it affect the real world.

Sir china was an export based economy and their export was always much much greater than their imports. This time their imports are greater than exports.

 

[Ray]

Thanks.

Even if there imports are greater than export, I presume the same is with other countries too.

How does it affect the world (to include the US and India) as far as China's growth, its military spending, the geostrategic realities and the international geopolitical scene?

 

[SHASH2K2]

China is a surplus economy and trade is heavily in their favour. Due to this they never had to worry about money to spend on various defense related project. same surplus economy allowed them to buy US debts as well. with trade not in favour anymore they need to rework on their strategy and it will put pressure on their economic plannings. Their currency is still undervalued and any further pressure on the to let it appreciate will further complicate the things. with High Inflation and property price they are not very comfortable with it . Their growth will continue but it will slow down a little and they will not be in position to splurge.

 

[Ray]

Thanks.

That was helpful.

 

[cw2005]

China has overdone stimulation for the last financial crises and the hyper inflation is the consequence of that. There would be several years of correction to be needed and during such period, the trade balance would be more or less balanced.

But hyper inflation is not happened in China alone, I read somewhere that India is also suffering high inflation with a CPI even higher than China. But then again, one might argue China CPI figure should be higher than what they told us.

About the Yuen's real value, I think part of the reason is the devaluation of the dollar. America is used to blame on others but not herself. No country could be spending more than her income forever. One article in the Times argued that even China do appreciate her money, the American trade deficit won't be reduced. America would import from other countries for the market.

The dollar-denominated commodity prices reflect scarcity and value of the dollar. It is a good indication on how the dollar has lost heavily in the last 10 years. Or when you compare "Free" floating currency rate between the EUR and Japanese Yen. The Dollar lost 30 to 40% of its value when compared 10 years ago.

 

[SHASH2K2]

Higher Commodity Prices Hit Beijing's Trade Figures


China on Sunday registered its first quarterly trade deficit in seven years, reflecting the rising prices of imported commodities and highlighting concerns that China's foundations of growth may be weakening.
China's trade reversal comes as finance ministers and central bankers gather this week in Washington for a conference of the Group of 20 industrial and developing economies and a meeting of the International Monetary Fund. The ministers are wrestling with turmoil in the Middle East, Japan and parts of Europe as well as soaring prices for oil and other commodities, and have looked to China to be an engine of growth.
World Bank chief economist Justin Yifu Lin says China has accounted for about a quarter of global economic growth between 2000 and 2009, edging out the U.S. for the top spot. Most economists predict another banner year for Beijing and forecast further growth—especially with a boost from the U.S. economy's gradual recovery—although slightly less than last year's 10.3%.
But the trade deficit suggests commodity prices surging at faster-than-anticipated rates could blunt some of the gains.
Since the start of the year, J.P Morgan has increased its forecasts for global inflation in the second quarter of 2011 by about one percentage point to 3.6%, and this week reduced its forecast for global growth in the first six months of 2011 by nearly one percentage point to 3.2%, on an annualized basis.
In March, China managed to eke out a small trade surplus, the government said Sunday, as the trade balance swung to a $139 million surplus in March from a $7.3 billion deficit in February.
China's imports in March rose 27.3% from a year earlier, up from February's 19.4% rise. Exports rose 35.8% from a year earlier, up from February's 2.4% increase, which was suppressed due to the Lunar New Year holiday that month, when many exporters shut down production. For the first quarter, however, China reported a deficit of $1.02 billion, the first time it reported a quarterly trade deficit since the first three months of 2004.
For the full year, China is still widely expected to post a significant trade surplus. Its foreign trade tends to go through a cycle in which companies stock up on imported raw materials early in the year; those are then processed into exports.
But the annual surplus is likely to narrow over the coming year as a slowly strengthening currency, rising labor costs and general inflation are making exports somewhat more expensive, while rising commodity prices are inflating the costs of imports. Wang Tao, China economist for UBS, estimates China's trade surplus this year will be around $150 billion, which would be down nearly a fifth from last year's level and mark the third straight year of decline.
The Chinese government has made scant progress on tapping the country's potentially vast domestic market. The percentage of the economy accounted for by consumer spending has fallen and is about 35% of GDP—about half the level of the U.S.
The ability of China to continue its 30-year record of 10% annual growth faces other challenges, including a roughly 5% annual rate of inflation. That is nearly twice the pace of a year ago, and is widely expected to move higher in the next few months despite the Chinese central bank's recent tightening of interest rates and bank reserve requirements.
A bursting of China's property bubble would be especially damaging.
In China's three dozen largest cities, prices have shot up by about 50% over the past two years, according to Dragonomics Research, a Beijing consulting firm. Ordinary Chinese have become real-estate speculators, figuring that real-estate prices can only go up. State-owned industries are also big speculators, using loans they received from state-owned banks in late 2008 to fight the global recession to invest in urban real estate.
China is trying to let the air out of the real-estate bubble by increasing mortgage down payments, but that may not be enough.
Among other factors, local governments have an incentive to boost real-estate development because they rely on land sales to fund their operations.
China specialist Nicholas Lardy says a real-estate collapse could shave 2.5 percentage points off Chinese growth—a deeper hit than the country took at the start of the global financial crisis.
Other parts of China's growth model may also be losing steam. China has grown rapidly by huge investments in highways, airports, shipping terminals, mines and steel mills and by helping exporters through low wages and an undervalued currency.
Although investment has risen to nearly 50% of gross domestic product, job creation is limping along at 1% a year.
A wild card in China's growth is the prospect of political unrest.
One reason the government is focusing on inflation is because anger over high prices has often preceded unrest, notably during the Tiananmen Square protests of 1989.
In the two years following Tiananmen, China's growth rate fell sharply as questions about whether the government continued to back reforms led to economic stagnation.

 

[LETHALFORCE]

I would be grateful if someone could explain what exactly China posts quarterly trade deficit means in layman's language and how does it affect the real world.

It means Chinese economy is no longer growing at the same 10% pace during this quarter.

 

[AOE]

That's something new; I never knew China was fudging its own economic data. That does explain a lot.

 

[LETHALFORCE]

That's something new; I never knew China was fudging its own economic data. That does explain a lot.

The growth in China is an infrastructure buildout that is fueled by commodities, it is not a real industrial growth like USA went thru 100 years ago.