March 12, 2012 - 8:04AM
China has recorded its largest trade deficit in more than two decades as Europe's sovereign debt crisis subdued exports and oil imports rocketed.
The country's customs bureau said the shortfall was $US31.5 billion, thought to be its biggest since at least 1989. Imports rose 39.6 per cent from a year earlier, after a 15.3 per cent slump in January, while exports increased 18.4 per cent.
Analysts had expected a deficit as imports rebounded from temporary disruption after the unusually early Lunar New Year in January but they had predicted a greater rise in exports and a smaller increase in imports.
Efforts by Chinese companies to sell to the West have been hampered by the effects of the eurozone debt crisis and an anaemic economic recovery in the United States, although shipments to the US climbed 22.6 per cent from a year earlier to $US19.4b. Overseas sales to the European Union rose 2.2 per cent to $US19.4b after a 3.2 per cent drop in January.
Illustrating the increasing importance of trading with emerging markets, during the first two months of the year trade volumes with Russia jumped 31.9 per cent to $US13.51b.
Imports of copper last month were the second-highest on record, while net crude oil imports increased to a record to meet rising demand as farmers prepare for the planting season and the government adds to emergency stockpiles.
The figures came after statistics on Friday showed China's inflation rate slowing sharply in February and factory output growth also slipping. Data showed that inflation had fallen to 3.2 per cent last month, down from 4.5 per cent in January.
"Overall, economic conditions are getting weaker at a fast pace," said Zhiwei Zhang, a Nomura economist. "The slowdown is happening faster than the government expected."
There is speculation that China's moderating inflation and growth will lead the Government to loosen policy. Citigroup believes a cut in banks' reserve requirements may come as soon as this month.
"We would suggest that the inflation bubble in China last year is well and truly burst, and the policy easing can accelerate," said Gerard Lane, equity strategist at Shore Capital. "This would be beneficial for the likes of miners and other emerging market related stocks."
Song Yu, an economist at Goldman Sachs, suggested that the nation will still see a sizeable trade surplus for the full year as the deficit in early 2012 is largely seasonal.
Data in January and February was distorted by the timing of the New Year holiday, which fell in January this year and February last year.
The Daily Telegraph, London
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