China Trade Balance


First quarterly trade deficit in 7 years while FX reserves exceed USD 3 trillion

In March, the trade balance turned positive again after February's drop due to the Chinese New Year holiday. Exports surged 35.8% over the same month last year (February: +2.4% year-on-year) while imports jumped 27.3% (February: +27.3% yoy). Both readings overshoot market expectations of 23.4% and 20.6% respectively. As a result, the trade balance swung from a USD 7.3 billion shortfall in February to a USD 139 million surplus. The 3-month moving sum of exports amounted USD 400 billion, virtually matching February's outturn of USD 402 billion. Meanwhile, imports stepped up further to USD 400 billion from USD 389 billion. As a result, the trade deficit reached USD 1.0 billion in the first quarter of the year, the first quarterly trade deficit since Q1 2004. Analysts consider the first quarter trade deficit as being distorted by seasonal factors but also as a reflection of both strong domestic demand and higher input prices (mainly commodity costs). However, the trade deficit also suggests a less export-driven and more balanced economic growth, as announced by the government in the latest National People's Congress. Meanwhile, the People's Bank of China (PBOC) announced that the foreign-exchange reserves surpassed the USD 3 trillion threshold in the first quarter of 2011, mainly due to large capital inflows, as the trade balance in the same period was negative.

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