China Has Negative Balance of Trade

March 12th, 2012
in econ_news

Econintersect:  For the seven years 2005-2011 China ran a trade surplus of more than $1.9 trillion (average nearly $276 billion per year).  So a China-flagbalance of trade deficit for China is big news.  Slowing export growth pushed China into a current account deficit (negative trade balance) in February 2012.  Exports actually declined by 23.6% month-over-month in February but remained up 18.4% from a year earlier.  The amount of the trade deficit is not large, $31.5 billion, but this is a new phenomenon for the country.  China has had occasional short-term deficits before but this is larger than what has been seen.  For example, in the first two months of 2011 the trade deficit was $890 million; however, this year the number dwarfs that at $4.1 billion.

Follow up:

China continued to show strong import numbers for February, led by oil and metals.  In January the trade balance was positive ($27.4 billion), buoyed by a sharp decline in imports.  The fact that the average of the two month total produces a negative current account must be considered a downside surprise.

There are still expectations that China will show a positive balance of trade for the entire year.  From Reuters:

"Imports were strong in February partly due to restocking among manufacturers in anticipation of rising commodity prices.  That led to a big trade deficit in February but we should notworry too much about it," said Hua Zhongwei, economist at Huachuang Securities in Beijing.

"Europe and the U.S. are slowly recovering. We should not be too pessimistic about China's exports. Export growth could be around 10-15 percent (in 2012). We will have a trade surplus for the whole year," Hua said.

John Lounsbury



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