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April 10, 2013, 12:21 a.m. EDT

China posts surprise trade deficit for March

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By Michael Kitchen, MarketWatch

LOS ANGELES (MarketWatch) — China swung to a trade deficit of $880 million in March, the General Administration of Customs reported Wednesday, as imports surged 14.1% from a year earlier.

The deficit, which followed February’s $15.3 billion surplus, missed a forecast for a surplus of $14.7 billion from a Dow Jones Newswires survey and a $15.2 billion projected surplus tipped by Bloomberg News.

A port facility in Shanghai.

The gain in imports, which fell more than 15% in February, exceeded a 6.1% growth forecast from Dow Jones Newswires and a 5.2% estimate from a Reuters survey.

Exports rose 10% from March 2012, less than Dow Jones’ expected increase of 12% and well below an almost 22% rise in February.

Believe it or not?

Chinese trade data have of late drawn skepticism from analysts, who say recent trade numbers appear to overstate exports when compared with other data sets.

A Bloomberg report earlier in the week cited Hong Kong-based Nomura chief China economist Zhang Zhiwei as saying recent export growth “sounds too strong for me,” while a Goldman Sachs report said local governments in China may be acting to boost the data by recording some exports twice.

And while the March numbers showed cooling to the red-hot export growth of the previous months, some analysts remained doubtful.

“Whilst total export growth of 10% year-on-year in March is far more reasonable a number than in January and February, the breakdown of exports by destination veers towards the absurd,” wrote IHS economists Xianfang Ren and Alistair Thornton.

They cited the data’s 93% surge in exports to Hong Kong, coupled by a 14% drop in Europe-bound shipments and a 7% fall in those to the U.S.

“Given a lot of exports to Hong Kong are actually re-exported to the E.U. and U.S. as final destinations, this seems a little incongruous, to say the least,” they wrote.

They offered “guesses” as to reasons behind the alleged inaccuracies, including capital inflows disguised as exports, fake orders meant to secure government export-tax rebates, and political pressure to goose the data.

But Bank of America Merrill Lynch’s China economist Ting Lu said that while the “abnormally strong export growth” in the first two months of the year couple be the result of exporters over-reporting their shipments, “the 10% growth in March could just be back to normal.”

This 10% export growth is more real as it’s in line with other data such power consumption, industrial production and transportation.,” he said.

Domestic demand feeds imports

KGI Asia Chief Operating Officer Ben Kwong said that the data were in line with the Chinese economy’s general movement away from its longstanding focus on exports.

Click to Play

China’s slowing inflation Is good news for Asia

China’s consumer price index rises just 2.1% in March, which may be a big positive for the economies of China and the region as a whole.

“If you look at the ongoing trend of the Chinese economy ... domestic demand will continue to grow” boosting imports, while export growth appears to have eased due to weakness in Europe.

The sharp drop in the yen since late 2012 was also a factor, he said, adding that even though Japan and China sell somewhat different categories of products overseas, the falling yen “will affect Chinese exports to a certain extent.”

Going forward, Kwong tipped China to move between small deficits and small surpluses until there’s significantly more recovery in the global economy.

Kim Eng Securities director of sales trading Andrew Sullivan said the rise in imports was a positive indication, as it suggests “that domestic consumption is showing signs of rising, which is in-line with the central government’s policy and would be good for China long term.”

The Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 +2.74%  rose briefly immediately after the data but then moved lower to trade with a 0.3% loss.

The Australian dollar /zigman2/quotes/210560947/realtime/sampled AUDUSD -0.1418% — often sensitive to economic news from Australia’s top trading partner — rose from $1.048 ahead of the data to $1.051.

CN : China: Shenzhen
¥ 15.02
+0.40 +2.74%
Volume: 94.86M
May 20, 2022 3:00p
P/E Ratio
Dividend Yield
Market Cap
¥283.71 billion
Rev. per Employee
US : Tullett Prebon
-0.0010 -0.1418%
Volume: 0.0000
May 20, 2022 4:59p

Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews.

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