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China reported a surprise trade deficit in February as surging prices for oil and other commodities pushed up its import bill.
February export growth plunged to 2.4 per cent as businesses were idled for the weeklong Lunar New Year holiday while imports of higher-priced oil and other goods rose 19.4 per cent for a deficit of $7.3-billion, data showed Thursday.
The February slump offset January's 38 per cent jump in exports as suppliers rushed to fill orders before the Lunar New Year shutdown. Many analysts group together January and February trade data to screen out distortions from the holiday, which falls on different dates within the two months each year.
Analysts said the February deficit was likely to be temporary and China should return to surplus in coming months.
For the January-February period, exports rose 21.3 per cent to $247.5-billion while imports gained 36 per cent $248.4-billion, for a deficit of $900-million.
That export growth was down only slightly from the 28 per cent rate of the second half of last year, said Citigroup economist Minggao Shen.
Exports are “moderating, which is expected, but not by much,” the economist said. February's trade gap “is due mostly to relatively fast import growth.”
A smaller trade surplus might help to ease trade strains with Washington and other governments that complain Beijing is giving its exporters an unfair advantage with currency controls and other policies.
Stronger imports could help economies that are looking to China's robust growth to drive demand for their goods. Imports also might benefit from government efforts under way to boost consumer spending to reduce reliance on exports and investment.
China is a major importer of oil, iron ore and raw materials and runs a deficit with suppliers such as Saudi Arabia and Australia. It pays for that by running multibillion-dollar surpluses with the United States and Europe.
Weak consumer demand in the West helped to narrow China's February trade surpluses with the United States and Europe. The gap with the U.S. fell 23.7 per cent from a year ago to $8-billion. The surplus with the 27-nation European Union, Beijing's biggest trading partner, declined 30.3 per cent to $7.6-billion.
Chinese purchases from major exporters of minerals and farm goods surged, driven by higher prices. Imports from South Africa were up 174.6 per cent, from Canada by 114 per cent and from Australia by 53.6 per cent.
Analysts expect a Chinese global trade surplus this year of $160-billion-$200-billion but say that should narrow if oil and commodity prices stay high. Last year, China ran a trade surplus of about $16-billion a month.
Mark Williams of Capital Economics said he estimated the surplus would have stayed at that level in January and February if commodity prices were unchanged from a year ago.
“Leading indicators of export demand and past experience both suggest that the surplus will rebound strongly in the months ahead,” Williams said in a report. “February's numbers do not point to a dramatic slowdown either in China or abroad.”
January-February exports were $247.5-billion while imports were $248.4-billion, producing a deficit of $900-million, customs data showed. In February, exports were $96.7-billion while imports were $104-billion.
Commerce Minister Chen Deming said Monday that imports should rise this year, possibly narrowing the trade gap, as the communist government promotes consumer spending to reduce reliance on exports and investment to drive growth.
Plans call for raising household spending power through wage hikes and subsidies to poor families.
“Our foreign trade policy principle this year is `stabilize exports, promote imports, reduce the surplus',” Mr. Chen said. Still, he said Beijing had no plans to de-emphasize exports and expects a trade surplus for the year.
Imports also are being driven by economic growth that hit 10.3 per cent last year. This year, the International Monetary Fund is forecasting a 9.6-per-cent expansion.
This week, the Cabinet's planning agency said China should avoid a “double dip” slowdown in growth – a positive sign for economies that are counting on Chinese demand to help drive sales of their goods.
Meanwhile, China's trade is starting to reflect the impact of rising Chinese wages and other costs that are forcing exporters to hike prices for foreign customers.
Producer prices rose 6.6 per cent in January and analysts expect elevated inflation through at least the middle of this year due to strong demand and high global commodity prices.
Global Sources, a company that connects Chinese suppliers with foreign customers, said last month that 74 per cent of companies responding to a recent survey raised prices last year by up to 20 per cent due to higher costs for materials and components.
A separate Global Sources survey found 31 per cent of companies that responded were increasing purchases from Vietnam due to higher Chinese prices.
" USD - Trade deficit widens in the month of January "..
" CAD- International merchandise trade shrank in January " ...
The U.S. trade deficit widened much more than expected in January to US$46.3 billion, on surging imports of oil, capital goods and cars.
Analysts had expected the trade gap to grow moderately to US$41.5 billion, from a revised estimate of US$40.3 billion in December. The closely watched trade gap with China also widened.
Led by higher oil prices, U.S. imports of goods and services leapt 5.2% in January to US$214.1 billion for the largest month-to-month gain since March 1993.
The strong growth was a sign of improved U.S. demand, but the bigger-than-expected gap could prompt analysts to scale back their estimates of first-quarter U.S. economic growth.
The average price for imported oil soared to US$84.34 per barrel, the highest since October 2008, and imports from the Organization of Petroleum Exporting Countries (OPEC) also rose.
Imports of capital goods, such as industrial machinery, engines and medicinal equipment, hit a record US$41.7 billion while imports of foods, feeds and beverages were a record US$8.5 billion.
Car imports were the highest since February 2008.
U.S. exports of goods and services grew 2.7% to a record US$167.7 billion, with both exports of goods and exports of services at record highs.
The previous record of US$165.7 billion was set in July 2008, just before the global financial crisis which caused world trade to plummet.
Despite export growth to the rest of the world, U.S. exports to China fell more than 20% in January to US$8.1 billion while U.S. imports from China grew slightly to US$31.4 billion.
That resulted in a bilateral U.S. trade deficit of US$23.3 billion during the month that Chinese President Hu Jintao was in the United States for talks with President Barack Obama.
The trade deficit with China is a sore point in relations and both sides have promised steps to bring trade more into balance.
Canada's trade surplus shrank considerably more than expected in January, to $116-million, as imports reached their highest level since 2008 while the pace of export growth slowed.
The January trade surplus, reported Thursday by Statistics Canada, was far less than the $2.6-billion that economists anticipated, and the agency revised the December surplus down to $1.7-billion from the originally reported $3-billion. The gain in imports was largely from automobiles and energy. Policy makers have warned that exporters will face challenges over the year, with a Canadian dollar shooting well above parity with its U.S. counterpart.
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