Trade surplus falls as export slump accelerates

PUBLISHED : Monday, 09 March, 2009, 12:00am
UPDATED : Monday, 09 March, 2009, 12:00am

China's trade surplus plunged last month as a result of the country's accelerating slump in exports relative to imports.

A source close to the Ministry of Commerce told the South China Morning Post exports and imports had both dropped last month by more than 20 per cent year on year, resulting in a trade surplus of about US$7 billion, drastically down from US$39.1 billion in January, US$38.98 billion in December and a record US$40.09 billion in November.

This was a dramatic deviation from the generally ascending trade surplus trajectory that started in February last year and might signal worsening overseas market conditions for the country, analysts said.

China had been raking in big trade surpluses since the middle of last year, defying the global financial crisis and the rising number of factory shutdowns in export-reliant coastal provinces.

Exports in January fell 17.5 per cent year on year, while imports fell 43.1 per cent from a year earlier.

Analysts are expecting exports to slow further, projecting a trade deficit by as early as June.

'By the second quarter this year, or the second half at the latest, China will have a trade deficit,' Guotai Junan Securities analyst Lin Zhaohui said.

Mr Lin said that as the ambitious economic stimulus package Beijing announced last November started to take effect, more factories would restart their assembly lines, triggering more imports of raw materials and resulting in a trade deficit, as exports were not expected to pick up soon.

Although Beijing vowed to stabilise exports with increased export tax rebates and other preferential policies, prospects for exports are widely feared to be gloomy.

Guangdong Governor Huang Huahua has predicted zero export growth this year while trying to paint an 8.5 per cent growth rate for the provincial economy, higher than the national target of 8 per cent.

The governor told a press conference last week in Beijing that his provincial exports and imports shrank by 31 per cent in January and 20 per cent last month.

Last year, Guangdong, the country's most dynamic export province, witnessed export growth descend to 9.4 per cent from 22.2 per cent the year before, with its import growth rate down to 5.4 per cent from 17.5 per cent.

'China's export markets are really grim for the time being and may get worse in the foreseeable future,' said Qu Qing, an analyst with Shenyin & Wanguo Securities.