CN: Merchandise Trade Balance

Sat Feb 07 20:43:00 CST 2015

Consensus Actual Previous
level $48.01B $60.03B $49.6B
Exports-Y/Y 5.0% -3.3% 9.7%
Imports-Y/Y -3.0% -19.9% -2.4%

China's January merchandise trade surplus soared to $60.03 billion from $49.60 in December. Both exports and imports dropped from a year ago. Exports dropped 3.3 percent while imports plunged 19.9 percent. The majority of the drop in imports was the result of falling commodity prices, especially coal and oil. China's iron ore imports and crude oil imports dropped by 9.4 percent and 0.6 percent respectively by volume. However, in value terms, iron ore imports dropped by 50.3 percent and crude oil imports declined by 41.8 percent.

On a seasonally adjusted basis, exports dropped 10.5 percent after increasing 1.2 percent in December. Imports plunged 15.1 percent on the month after edging up 0.2 percent the month before. On the year, exports declined 1.4 percent after climbing 6.6 percent the month before while imports slid 14.5 percent on the year after declining 6.2 percent in December.

However, analysts say strong seasonal distortions due to the Lunar New Year holiday - where consumption usually spikes and production falls - make it difficult to interpret January trade numbers. Last year the holiday fell in January and this year it falls in February. The trade report indicates that China's economy is facing increasing difficulty and that the government needs to act more aggressively to support it.

The merchandise trade balance is the difference in value between imported and exported goods. Data are denominated in U.S. dollars. A positive number indicates that more goods were exported than imported.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they also affect currency values in foreign exchange markets. However, the foreign exchange impact is muted here given that the currency is pegged to a basket of currencies and its value is determined daily by the government.

China's growth stems from its exports to the industrialized world. And in turn, global growth is dependent upon Chinese growth, especially since the financial woes of 2008.

Merchandise trade statistics are compiled and published by Customs General Administration (CGA) on a monthly basis. Preliminary estimates are available about 13 days after the reference month with details available within 25 days. Since 1980, the compilation of Customs statistics follows the concepts and definitions of the International Merchandise Trade Statistics: Concepts and Definitions. Data are released for total imports and exports in the Chinese currency and the U.S. dollar. There are five main categories each for primary and manufactured goods. Detailed information is available by category, destination country, foreign enterprises and domestic region to name a few. Geographically, the data covers the customs territory of the mainland China and excludes Hong Kong, Macao and Taiwan.