China recorded a US$7.3 billion trade deficit unexpectedly last month. That was its largest shortfall in seven years, which may help mute US calls for Beijing to let the yuan appreciate.
Taking into account seasonal factors such as the Lunar New Year holiday, exports grew 2.4 per cent - the slowest pace in 15 months - to US$96.74 billion last month. That was well below the consensus forecast by economists for 27 per cent growth.
Imports rose 19.4 per cent to US$104.04 billion, compared with a consensus forecast for a 33 per cent increase.
The deficit of US$7.3 billion compared with a US$6.5 billion surplus in January. That left a year-to-date deficit of US$890 million, China Customs revealed yesterday.
Li Daokui, an adviser to the People's Bank of China, said yesterday that the trade surplus would continue to shrink for the rest of this year to account for about 2 per cent or less of the nation's gross domestic product, compared with 3 per cent last year and 10 per cent before the global financial crisis in 2008.
'The mainland economy is undergoing restructuring, which is a key factor behind the estimated decline in surplus,' Li said on the sidelines of the annual National People's Congress meetings in Beijing. 'I'm not surprised to see a trade deficit, which will ease international pressure for a higher yuan exchange rate.'
The trade surplus has been a focal point for calls from the United States government for a quicker and greater appreciation in the yuan against the US dollar, which Commerce Minister Chen Deming said on Monday were 'totally unreasonable'.
The yuan weakened to 6.5713 per US dollar yesterday from 6.5678 on Wednesday.
Li said the mainland was moving from an export-led economy to an import-driven market and from low-value products to value-added goods.
A sign of economic restructuring was reflected in labour shortages in manufacturing, he added.
He forecast the full-year trade surplus would shrink to US$150 billion from US$183 billion as imports grew faster than exports.
Economists are waiting for Premier Wen Jiabao's speech on the 12th five-year plan, a key message of which is expected to be drumming up spending power to spur domestic consumption and imports. Wen is due to deliver the speech on Monday.
Some NPC representatives have proposed doubling the mainland's minimum wage by the end of the five-year plan, or 2015, from now.
Bank of America-Merrill Lynch economist Lu Ting said the surplus would be lower this year at US$145 billion on 24.2 per cent growth in imports and a 19 per cent rise in exports.
He said the mainland, a regular importer of crude oil, could have its annual surplus pared by US$1.9 billion for every US$1 increase in oil prices.
In the first two months of this year, the mainland imported 17.2 per cent more in crude oil and 22.6 per cent more in iron ore. Its exports were 21.3 per cent higher and imports soared 36 per cent.
Of the major exporting hubs, Guangdong led the growth in exports, at 36.9 per cent to US$72.93 billion in the period.
'Growth momentum continued in the first two months of this year from the fourth quarter last year,' Morgan Stanley chief economist Wang Qing said of the trade sector.
HSBC chief economist Qu Hongbin attributed the strength in imports to rising commodity prices and internal demand on the mainland.
However, a Goldman Sachs research report warned that the mainland's monetary tightening could hurt domestic demand and hence dampen growth in imports.
Buy and buy
Exports grew 2.4 per cent to US$96.74 billion last month
By comparison, imports rose 19.4 per cent to, in US dollars: $104b