China Trade Surplus February 2008

China's trade surplus fell for the first time in almost a year in February as the worst blizzards in half a century disrupted the flow of shipments at the same time as demand from the Unietd States weakened.

The surplus was down by 64 percent in February from a year earlier, to a level of $8.56 billion, according to data released by the Chinese customs bureau.

Exports rose year on year by 6.5 percent, which was the slowest rate of increase in almost six years.

For the first two months of the year combined, the surplus was down 29 percent (at $28 billion) over january-February 2007. Imports, on the other hand, were up 35.1 percent in February, which was the biggest gain in more than three years. A significant part of the increase was the result of higher prices for commodities such as crude oil, iron ore and soy beans.

In January, exports rose 26.6 percent and imports climbed 27.6 percent.


It would be wrong to place too much importance on the change in the rate of surplus increase at this stage since China was swept by snowstorms in mid-January, and these will have delayed deliveries to ports and disrupted production at manufacturing companies. Also China's week-long Lunar New Year holiday also started earlier this year than last, leading exporters to bring some shipments forward to January. Another factor which will have contributed to the lower rate of export growth will have been abnormally high - 52 percent y-o-y - rate increase in February 2007, when exporters were pushed shipments through early to beat tax increases.

On the other hand import growth is likely to stay strong since China will continue to need materials for utility, railway and housing projects and for reconstruction work after the snowstorms.


Inflation is also busily creeping up. China's producer prices climbed 6.6 percent in February, and this was the fastest pace in more than three years, according to data from the statistics office today.




The consumer price inflation figure will be released tomorrow and many economists expect China to further raise interest rates, which are already at a nine-year high, possibly within days,.

The yuan traded near its highest level since the direct dollar peg ended in July 2005 on speculation the government will allow further gains in the value of the currency to help combat inflation. The yuan was at 7.1069 per dollar as of 4:15 p.m. in Shanghai, compared with 7.1110 on March 7.