China trade surplus surge, but weak imports highlight economic weakness

China posted a strong trade balance data in January, as imports dropped sharply on weak commodity prices and domestic demand. The latest data highlights the cracks in the Chinese economy.

The customs administration in Beijing, CGAC (Customs General Administration of China), announced that there was record monthly trade surplus of $60 billion in January, which came as a result of decline in both imports and export. Imports declined to its weakest in more than five years, a drop of 19.9 percent compared to a year earlier. This contrasts with a tiny 3.2 percent drop expected by analysts surveyed. Meanwhile, exports eased 3.3 percent, its weakest in nearly a year.

Wang Tao, chief China economist at UBS Group AG in Hong Kong, commented “It seems that sharp decline in commodity prices, weak domestic demand and weak external demand, reflected in processing imports, all played a role in the decline in imports. Trade data again creates a dilemma for the exchange rate. A record trade surplus is supposed to add appreciation pressure, but declining exports would say otherwise.”

Meanwhile, Liu Ligang and Zhou Hao of Australia & New Zealand Banking Group Ltd. Opined that it would not serve China well if it allows Yuan to decline sharply. They noted, “China’s central bank will continue to use a slew of instruments, including fixing rates, open market operations, and direct interventions, to prevent the RMB from weakening sharply.”

Commodity imports suffered a severe blow. Value of iron ore imports dropped 50.3 percent from a year earlier, crude oil imports fell 41.8 percent, while coal plummeted 61.8 percent. Imports declined from all major trade partners, including the European Union, Russia, Australia, and the United States. Exports to South Korea, Hong Kong, Japan, and the European Union all declined. Exports to Japan plunged 20 percent, while exports to the United States grew 4.8 percent.

facebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Leave a Reply

Your email address will not be published. Required fields are marked *