China’s surprise trade deficit suggests imports set to grow

Ben Southwood
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CHINESE imports surged above expectations over the year to March, pushing the country into deficit and boosting analyst hopes that future growth will be less dependent on exports.

Official figures out yesterday showed imports grew 14.1 per cent over the year – versus the 5.2 per cent expected by economists.

Since exports grew 10 per cent, half a percentage point below forecast, China’s trade moved into a deficit – albeit of only $884m (£577m). But this came after a $15.3bn surplus in February and a predicted $15.4bn surfeit for March.

Analysts were heartened by the fall in net trade, saying it suggested Chinese consumers and firms were ready to take responsibility for driving the country’s still-rapid growth.

“The stronger than expected import growth last month suggests this cycle is probably coming to a turning point,” said JP Morgan’s chief China economist Haibin Zhu.

“If domestic demand turns out to be stronger than expected, it’s definitely positive for the economic outlook,” Zhu added.

Exports currently fluctuate around an average of roughly 30 per cent of China’s GDP, with the EU and US the country’s two biggest markets.

This means that slowdown or recession in these markets can deliver a huge blow to the Asian giant. Last year, when the Eurozone sovereign debt crisis hit the bloc’s demand, the Chinese economy posted its lowest growth rate in 13 years – 7.8 per cent.