Update: China Records First Monthly Trade Deficit in 13 Months
China’s trade deficit reached nearly $5 billion in March, a turnaround from a surplus of $33.5 billion last month, customs data showed Friday, marking the first monthly deficit since February 2017.
China’s inbound goods shipments rose 14.4% year-on-year to $179.1 billion in March, while its exports dropped 2.7% to $174.1 billion, according to data from the General Administration of Customs.
Analysts attribute the export drop and trade deficit in March partly to distortion caused by the Lunar New Year holiday, which fell in the second half of February, when factories and offices are closed for one week or more. Some believe that trade tensions between China and the U.S. played a role in the decline.
The decline in March exports after a strong performance in January-February, namely year-on-year growth of 24.4%, suggests that Chinese exporters may have front-loaded exports in the first two months amid rising concerns over a potential trade war between China and the U.S., Wendy Chen and Lisheng Wang, economists at Nomura International (Hong Kong) Ltd., said in a research note.
The trade imbalance between the world’s two largest economies remains. China held a $58.3 billion surplus for the first quarter against the U.S., its second-largest trading partner after the European Union, up 19% year-on-year. This surplus figure hit a record high, and was even larger than the country’s headline surplus of $48.4 billion in the same period, Larry Hu, an economist with Macquarie Capital Ltd. in Hong Kong, said in a note.
U.S. President Donald Trump has constantly pressed China to reduce this surplus since he came into power. Over the past months, both sides have made tit-for-tat tariff threats, escalating trade tensions and shaking global markets.
China’s trade surplus with the U.S. is actually not as large as it appears if one takes into account statistical discrepancies, service trade and the trade of goods processed for re-export, Huang Songping, a spokesman for the customs administration, said at a press briefing on Friday (link in Chinese).
China’s officials have pointed out that the country has recorded a service trade deficit with the U.S. for years. China’s service trade deficit with the U.S. totaled $55.7 billion in 2016, according to data from China’s Ministry of Commerce (link in Chinese). In 2017, this figure was $38.5 billion, according to data from the U.S. Bureau of Economic Analysis.
“China has never sought a trade surplus against the U.S. The current trade situation is decisively driven by the market,” said Huang, attributing the China-U.S. trade imbalance to differences in both sides’ economic structures, industrial competitiveness and international division of labor.
Market participants’ nerves were somewhat soothed after Chinese President Xi Jinping promised on Tuesday harsher punishment for intellectual property rights violators and lower tariffs on certain products such as imported cars. Trump tweeted that he was “very thankful” for Xi’s promises as a response.
On a quarterly basis, China’s goods imports grew faster than exports, with year-on-year growth of 18.9% and 14.1%, reaching $496.9 billion and $545.3 billion, respectively, according to customs data.
Hu with Macquarie Capital views the first quarter as the likely peak for export growth this year, due to the yuan’s strong performance, slower global growth and lower price inflation in the country. The yuan has appreciated 9% against the U.S. dollar over the past twelve months, he said.
Contact reporter Lin Jinbing (email@example.com)
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