China Reports First Quarterly Trade Deficit in Seven Years

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Apr. 15 – According to recently released statistics by the General Administration of Customs, China experienced a US$1.02 billion-trade deficit during the first quarter of 2011 – the first time in the past seven years – making people wonder if a turning point for China’s economic growth pattern has arrived.

China has been paying efforts to become less export-dependent and drive the economic growth by stimulating domestic demand over the past few years. It has also been mildly appreciating its local currency in an attempt to tame inflation and ameliorate widespread international criticism of the government’s exchange rate control which, it has been argued, benefits domestic exporters.

Shrinking demand in developed countries and a decline in exports to  earthquake-hit Japan are considered to be the major contributors to China’s first quarter trade deficit.

However, it does not necessarily mean that a turn-around has arrived, according to Wang Hu of Guotai Jun’an Securities in Shanghai. Wang predicts China will enjoy a trade surplus in the coming months with the recovering demands in the United States and Europe.

With the awareness of Japan’s importance in China’s trade volume, experts are not completely pessimistic on the disaster’s future impact on China’s trade performance. While predicting Japan’s economy will slow down much more during the second quarter, economists believe the after-quake rebuilding will bring a massive amount of opportunities for Chinese exporters.

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