After 70 Months Of Trade Surpluses, China Records A $7.2 Billion Trade Deficit In March: Detailed Summary Of March Trade Data
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In March China recorded its first trade deficit after 70 straight months of trade surpluses, which has occurred even despite global calls that the Renminbi needs to be revalued by about 20%. The primary reason for this was that in March China imported a total of $119.4 billion worth of goods — the single greatest amount recorded in history. This was offset by $112.1 billion of exports, well below the record exports China was pumping out in late 2008 in the mid $130 billion range, and the $130.7 billion exported in December of 2009. Below we present a summary of the key highlights of China trade balance over the past 3 years.
The first chart summarizes the monthly total imports, exports and net trade balance with the entire world.
The second chart presents the net trade balance with China's key trading partners: the EU (long the primary foreign partner of China, and not, as is widely believed, the US), the US, Japan, ASEAN countries, Korea, Australia, Taiwan and the Rest of the World.
As the chart above shows, China's trade deficit with the traditional countries with which it is a net trade importer has surged to $25.8 billion from $16.5 billion the month before. China has hed a positive trade balance primarily with the EU, the US, and the Rest of the World (a group of countries which represent the peripheral trading partners of China, and excludes the EU, US, Japan, ASEAN, Korea, Australia and Taiwan). The amount of positive trade surplus in March declined from $24.3 billion to $18.5 billion. It is also notable that the Chinese trade balance hit an all time record deficit in its trade with Japan, which was $6.5 billion in March, more than double the $3.1 billion in February.
The next chart highlights China's primary trading partner: the EU — the total trade surplus of $4.8 billion declined to the lowest since the record low seen in February of 2009 of $3.8 billion. A big reason for the decline was the surge in EU imports to a record high of $14.5 billion.
When looking at the China-US trade data, it is interesting to observe that imports from the US hit a record number of $9.5 billion in March, even with all the rhetoric pushing for an increase in the CNY. Yet, this of course was offset by an increase in US imports from China, which jumped to $19.3 billion. So while the CNY did not appear to materially impact US-based imports, the US, in its restocking efforts to pump up GDP, has more than offset any benefit from Chinese demand for US goods.
Where the most notable change can be seen is the record surge in imports from the Rest of the World, which at $1.7 billion is likely to become a deficit number when the April trade balance is reported. To be sure, this is predicated by China's ongoing surge in inventory rebuild from peripheral countries, which for the most part tend to be commodity exporters. Look for this series to be most sensitive to a plateauing of China's inventory restocking efforts. Indeed, from July to December, when Chinese banks were cautioned about excess liquidity, this number increased from about $5 billion to $14 billion as China emphasized exporting. In 2010, with excess liquidity once again a core topic, this has materialized in a surge in imports, not only from the ROW but from most countries, and thus the trade deficit.
Some observations: while one month is not indicative of much, should the trade deficit persist in April, coupled with the ever increasing bad loans held by Chinese banks as described by Michael Pettis recently, one can see that a CNY reval at this point could easily be the single biggest mistake China could make — whether it is based on foreign pressure, or due to its own evaluation of the economy. Should Chinese GDP growth "patterns" not change much, and as most experts are aware, continue to be predicated primarily from a record build up in inventories and accumulation in homebuilding products, as well as commodities, we anticipate that the March deficit number is just the first of many. On the other hand, the EU should look at the Chinese-EU trade data and be extatic. If a one month Greek débâcle has the potential to spike European imports by China to the degree reported, Europe will certainly think long and hard about how else to keep the euro as low as possible, and thus European goods as cheap to China as possible. The GDP benefit to Europe from an improving Chinese trade deficit and a possible trade surplus (from the European perspective) certainly more than outweighs the associated deterioration that could come from a Greek failure and the EUR hit that would result (on the other hand the Euro will likely drop if Greece is bailed out as well, so this could very much be irrelevant, and be determined simply by just how many trillion China is willing to print to stock even more unnecessary products and commodities).
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Tags: 3 Years, Asean Countries, China Records, China Trade, China Trading, Chinese Trade, Commodities, Entire World, Imports Exports, Korea, Record Deficit, Renminbi, Rest Of The World, Time Record, Trade Balance, Trade Deficit, Trade Importer, Trade Surplus, Trade Surpluses, Trading Partners
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