China: Trade surplus expands in April
May 10, 2011
In April, the trade balance surged, supporting the view that China may tolerate a faster appreciation of its currency. Exports soared 29.8% over the same month last year (March: +35.8% year-on-year), while imports gained a more modest 22.0% (March: +27.3% yoy). While exports growth was broadly in line with market expectations of 29.5%%, import growth fell notably short of analysts' expectations of 28.9%. As a result, the trade balance jumped from USD 139 million in March to USD 11.4 billion in April, well above the USD 3.2 billion expected by the market. The 3-month moving sum of exports amounted to USD 405 billion, slightly above March's outturn of USD 400 billion. Similarly, imports matched the previous month's result of USD 400 billion. As a result, the trade balance in the last three months ending in April recorded a positive result of USD 4.1 billion, contrasting the deficit of USD 1.0 billion recorded in the first three months of 2011. Analysts see the moderation in imports as a sign that the government policies designed to curb bank lending are dampening domestic demand growth. However, in part, the slowdown in imports is likely related to supply chain disruptions in the wake of the 11 March Tohoku earthquake. Japan is China's most important source of imports and according to data from Customs General Administration of China, Japanese imports slowed from a 35.0% expansion in January to 4.6% in April. While uncertainties regarding the full restoration of the Japanese-fed supply chain persist, the downside effect should fade in the months ahead, thus rekindling import growth. On the other hand, the plunge in commodity prices registered in early May is likely to reduce the import bill.