China has just reported its first monthly trade deficit in three years. Imports have increased and output has decreased. Imports are said to have risen due to higher commodity prices and higher domestic demand which are reported to have pushed up imports 38.1%. While imports rose, exports fell 1.3 % resulting in a $9.2 billion trade deficit for the month. While this report may come as a big surprise, imports are expected to eventually slow down to bring China back to where it was. Many researchers believe a surplus is inevitable, and the current rise in imports cannot be sustained long term. Chinese officials are likely to be encouraged by this news as they are wishing to balance the Chinese economy because growth rates have been slow.
It will also be fascinating to see how Donald Trump will react to the possible shift in the Chinese economy. Before taking office, he was highly critical of China and claimed that they manipulate their currency. Since taking office though, he has not touched that subject yet. Maybe this is a sign of a new turn in China's economy, or skeptics may be correct in their assumption that the trade deficit is a blip. Either way, this highlights the influence China's economy has on the rest of the world and even the possibility of a trade balance makes one think about what that means for the world.
http://www.bbc.com/news/business-39191200
6 comments:
It has been reported that seasonal factors are linked to the annual week-long Lunar New Year holiday help explain February’s trade deficit. Its leaders will likely begin to reconfigure the Chinese economy as it is driven by exports and state investment. It will not be surprising to see a stronger demand from U.S consumers. This will help China’s economy to gain from a weaker yuan through its exports. Donald Trump may not be the biggest advocate as he and his administration have been bent on reducing trade deficit. China’s trade at the start of the year is difficult to interpret as businesses and firms close weeks ahead of the Lunar Holiday.
This is unlikely to sit well in a Donald Trump White House bent on reducing the trade deficit, or with Commerce Secretary Wilbur Ross, who said last week specific measures against China will be announced as soon as a proper case is prepared. I read the other day that China is continuing a rapid swing away from factory deflation with producer prices, scheduled for release Thursday, estimated to have surged 7.7 percent, the most since 2008. That shift is helping restore exporters’ margins, boost profits, and cut real borrowing costs. I agree with Khadija, China’s trade at the start of the year is difficult to interpret as businesses and firms close weeks ahead of the Lunar Holiday.
That is very interesting to see coming from China. I do not think anyone would expect to see the decrease in exports. However, in my opinion I think it is just a blip and will be corrected before we know it. I am curious to see if potentially the change in U.S. office does have something to do with it though. The new POTUS has already had an extreme effect on many sectors of the economy domestically, so maybe it is beginning to see the effects internationally.
I am curious to see how this deficit affects the United States and the rest of the world. I do believe however that the surplus will decrease to bring the output trade back to equilibrium. And who knows, this may be an advantage to China as officials have been hoping to get the economy back in balance. I do not believe Trump will try and comment on it, as taking office has showed to be more work than he anticipated. Thus, he's very busy (golfing)!
The economic data in China from January and February can be misleading due to the long holidays when businesses slow down and often cut back on operations or close completely. Once the impact of the holidays wears off, a surplus is inevitable. It is believed that the temporary trade deficit has little to do with Donald Trump's plan on trade with China.
I agree with Khadija's point the Lunar New Year holiday can help explain the February's trade deficit. This week-long national holiday does influence consumption a lot. People began to prepare for the holiday even several weeks before the Lunar New Year. This not only increases demand of imported goods but also decreases export. Also, the tension between China and Korea, also America would definitly affect the trade in the following months. I feel it would be harder to predict how the trade situation will go.
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