China posted a trade deficit of $US7.3 billion, the biggest for seven years, in February as the Lunar New Year holiday cut exports and imports.
Exports grew by 2.4% year on year to $US96.74 billion while imports increased by 19.4% to $US104.4 billion.
The growth in exports slowed sharply from the 38% rise in January and imports also dropped dramatically from the 51% surge recorded in the same month.
It was China’s first trade deficit since March last year when a deficit of $US7.2 billion was reported, and the biggest since February 2004.
The market had forecast a surplus of $US4.95 billion.
The news helped send global stocks lower, but that was a wrong reading of the news.
The headline was worse than the reality.
The fact that the deficits occur fairly regularly in February, when the Lunar New Year usually occurs, tells us that we should not take the figure seriously.
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 the Lunar New Year.
And we see imports jump in December through January to build stocks of raw materials, as we saw with imports of oil, copper, raw material, coal and foodstuffs late last year and in January of this year.
The Chinese government has in the past pointed to the narrowing trade surplus as evidence that it is making headway in dragging the country away from excessive reliance on exports.
But a deficit in May or October, for instance, would be a significant development because they are usually peak shipping months for Chinese exporters.
China ran a $US6.5 billion trade surplus in January and averaged $US15 billion a month last year. The surplus was $US13.1 billion in December.
China’s Commerce Minister Chen Deming earlier this week forecast that the trade surplus would shrink again in 2011 after falling to $US183 billion last year, down from $US196 billion in 2009 and the record $US295 billion in 2008.
Other economic data will be released later today on inflation, industrial production, house prices and retail sales.
Car sales slowed in February because of the lengthy holidays.
Industry figures showed a 33.1% fall in sales in February from January. But they were up 3% on February last year.
The February vehicle production fell almost 30% to 1.26 million units from January.
The February data took China’s auto sales in January-February to 3.15 million units and output to 3.09 million units, according to the China Association of Automobile Manufacturers.
According to CAAM, 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.
