Unexpected Trade Deficit After Seven Years in China

Steven Bobson, Europe & Americas Editor
April 10, 2011 /

For the first time since 2004, China declared an unanticipated trade deficit of $1.02 billion for the first quarter of 2011 on Sunday, April 10, 2011.

The deficit was considered to happen too early for China’s 12th five-year plan to end its export oriented policy which was launched just┬áthis year.

It was also considered a complete turnaround from the $13.91 billion trade surplus of the first quarter last year, based on the figures released by the General Administration of Customs of China.

According to the customs administration, the trade gap was caused by the strong rise in imports in the country for the first quarter this year which hit a record high of more than $400 billion.

In addition, the rise in imports are attributed to rapid domestic growth, surging prices for food, energy and other raw materials and a long vacation during the Chinese New Year in February.

On the other hand, analysts remarked that the deficit showed that China is already making progress in rebalancing its export-reliant economy.

BNP Paribas economist Isaac Meng told Dow Jones that the rebalancing is evidenced by the rising import prices that eroded the surplus and the domestic inflation that raised export prices in the country.

US Treasury Secretary Timothy Geithner said last month that China had no choice but to change its growth strategy to boosting its domestic growth more as demand weakens in the US and Europe.

To accomplish it, China decided to cut tariffs on imports and to relax some restrictions on importers to invite more products in the country.

 

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