China Trade February 2017


China: Surging imports lead to first trade deficit in three years

March 8, 2017

Exports fell 1.3% annually in February, contrasting the 7.9% expansion in January. The print undershot the 14.0% rise that market analysts had expected. February’s drop was mainly the result of the timing of the Chinese New Year holidays, which fell in January this year compared to February in 2016.

Meanwhile, imports jumped an astonishing 38.1% annually in February, which came in well above the 16.7% increase in January. The print overshot the 20.0% expansion that market analysts had expected and represented the fastest increase since February 2012. February’s print mostly reflected strong demand for raw materials and higher commodity prices.

As a result of the strong rise in imports, the trade balance switched to a USD 9.1 billion deficit in February this year from a USD 28.2 billion surplus in February 2016. The 12-month moving sum of the trade surplus decreased from January’s USD 508 billion to USD 570 billion in February, which marked the lowest value since January 2015.

Despite the surprising trade deficit in February, analysts do not consider that it signals any meaningful change in China’s trade structure. As Betty Rui Wang, Betty Wang, Senior Economist at ANZ Research, points out:

We think February’s trade deficit, which was mainly driven by the strong rebound in imports, is unlikely to continue in the coming months and indicates little change in China’s trade dynamics. This is because the trade data for Q1 tends to be volatile due to the seasonal effect of the Lunar New Year holiday period. China has reported several single month trade deficits in the past decade, with all of them occurring in Q1 (either in February or March). We expect China to move back to a trade surplus in the coming months.

FocusEconomics Consensus Forecast panelists project that merchandise exports will expand 2.2% in 2017, while imports will rise 2.9%, driving the trade balance to a surplus of USD 511 billion. For 2018, the panel expects exports to expand 0.7% and imports to increase 0.8%, while the trade surplus will drop to USD 512 billion.

Author: Ricard Torné, Lead Economist

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China Trade Chart

China Trade12m February 2017

Note: 12-month sum of trade balance in USD billion and annual variation of the 12-month sum of exports and imports in %.
Source: General Administration of Customs of the People’s Republic of China and FocusEconomics calculations.

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