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By Jason Simpkins
Chinese exports recoiled and imports surged in February, suggesting the nation's politically contentious trade surplus may be growing more slowly or has finally peaked.
China's February trade surplus shrank to $8.56 billion, down from $19.5 billion in January and $23.8 billion a year ago. The rolling 12-month surplus fell 5.6%, from $265.5 billion in January to $250.6 billion, according to the nation's customs bureau.
Exports to the United States dropped 5% in February to $16.4 billion, while imports of American goods soared 33% to $6.1 billion. China's trade surplus with the European Union, its biggest trading partner, plummeted 15% to $10 billion. Meanwhile, imports for the month climbed 35% to $78.8 billion from a year ago. The export rate of growth dropped 6.5%.
The news is good for the United States and European Union, which have repeatedly lobbied the Chinese government to ease price controls they say keep the yuan undervalued and give Chinese exporters an unfair advantage.
Chinese and EU officials will meet in Beijing in April to start a round of regular high-level meetings aimed at defusing trade tensions. China holds similar biannual meetings with the United States.
Many analysts were quick to attribute the shrinking surplus to a production and shipping delays caused by the Chinese New Year, inclement weather and record high prices for commodities that drove the cost of imports skyward.
"Taking January and February together certainly makes much more sense than taking the February figures on their own," Paul Cavey, an economist at Macquarie Securities, told Reuters. "So that would imply export growth has slowed a little bit and import growth has picked up a little bit, which is the trend we expect for the year as a whole."
More disturbing to analysts and Chinese officials alike were the implications for inflation, which continues unabated. Consumer inflation rose 7.1% in January, its highest level in 11 years, and is expected to have accelerated in February. The major impetus for that increase was the cost of food, which rose more than 22% from a year earlier, China's official news agency, Xinhuareported.
The Bank of China estimates that inflation increased to 8.3% last month, as wholesale prices rose 6.6% in February. The bank said food prices likely rose 6% to 7% from January and 22% to 23% year-over-year. The National Bureau of Statistics will release its official figures today.
"Making things worse… when people expect prices to keep rising, they will spend more to avoid those future rises, which in turn will push prices up," the bank said in a statement.
Since early 2007, China has hiked its interest rates six times. And while the central bank said last week that there is "definitely room" for more interest rate hikes, analysts remain wary. The United States Federal Reserve has reduced its rate by 225 basis points in the past six months, and Chinese policymakers fear that too large a gap between the Chinese and U.S. rates will attract more speculative funds into the economy, increasing liquidity that has already saturated the market.
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