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China Registers Trade Deficit for February

  • Stephanie Ho

Floor traders walk inside the trading hall of the Hong Kong Stock Exchange, March 2, 2011

Floor traders walk inside the trading hall of the Hong Kong Stock Exchange, March 2, 2011

Chinese trade figures released Thursday show a surprising deficit for February, as export growth slowed and import numbers remained strong.

Chinese statistics released Thursday show that the country registered a trade deficit in February of $7.3 billion.

It was China’s first trade deficit since March last year, and the largest in seven years. But the country is expected to return to a trade surplus this month.

Li Wei, with Standard Chartered Bank, says the February data is "heavily distorted" because of the Lunar New Year holiday.

"Most of the traders frontload their trading activities in January, in preparation for the Chinese New Year, when most of the people simply go home, celebrating for almost two weeks," said Li.

Economic activity in China slows before and after Chinese New Year, which this year was February 6.

Li says even if there are some monthly trade deficits, he is confident that, by the end of the year, China will have an overall trade surplus.

"Let us make an assumption that, if we assume that the exports grow at 20 percent for this year, and imports are up by 30 percent, which is 10 percent higher,” Li added. “We still end up with a trade surplus for the whole year."

Commerce Minister Chen Deming indicated this week that China wants to narrow its overall trade gap for this year.

Chen says China’s policies this year will be guided by wanting to stabilize exports, expand imports and decrease the trade surplus.

Surging exports have largely contributed to China’s rapid economic growth. But, as demand slows in key markets like the United States and Europe, China has said it will make up for the lost demand by focusing on trying to increase domestic consumption.

A related issue is the value of China’s currency, the yuan. Countries like the United States have accused China of maintaining an unfair trade advantage by keeping the value of the yuan artificially low, which makes Chinese exports more affordable.