CN: Merchandise Trade Balance

March 8, 2017 06:00 CST

Consensus Actual Previous
Level [$] $27.0B $-9.15B $51.35B
Exports-Y/Y [$] 14.0% -1.3% 7.9%
Imports-Y/Y [$] 22.0% 38.1% 16.7%
Level [Yuan] ¥-60.4B ¥354.53B
Exports-Y/Y [Yuan] 4.2% 15.9%
Imports-Y/Y [Yuan] 44.7% 25.2%

China's trade balance moved from surplus to a deficit of $9.15 billion in February. This was the first monthly trade deficit since February 2014 but largely reflected the impact of lunar new year holidays. Nevertheless, even when looking at year-to-date data, China's trade balance is weaker than it was for the same period in 2016, largely reflecting stronger oil imports.

Exports fell 1.3 percent in February, weaker than the consensus forecast for an increase of 14.0 percent, while imports rose 38.1 percent on the year, well above the consensus forecast of 22.0 percent. In seasonally adjusted terms, Chinese exports fell 28.1 percent on the month in February after a fall of 8.4 percent in January. Seasonally adjusted imports fell 0.3 percent on the month, after dropping 11.5 percent in January.

In local currency terms, China's trade balance swung from a surplus of Y355 billion in January to a deficit of Y60 billion in February. Exports rose 4.2 percent on the year, while imports rose 44.7 percent on the year.

Growth rates, both month-on-month and year-on-year, for Chinese data early each calendar year are impacted by the timing of public holidays for the lunar new year. This year these holidays occurred in January, whereas in 2016 they occurred in February. This means that, compared with 2016, there are fewer working days in January and more working days in February in 2017.

Looking at the year-to-date data for January and February combined, and comparing it with the data for same period last year, gives a clearer picture of underlying trade performance since the start of the year. China's trade balance year-to-date is a surplus of $42.13 billion, around 56 percent below the surplus of $95.90 billion recorded in the first two months of 2016.

This smaller surplus is almost entirely driven by stronger imports so far this year. The value of China's exports for the first two months of 2017 have totalled $302.8 billion, only 0.3 percent below the $303.6 billion recorded for the first two months of 2016. The value of imports, meanwhile, have totalled $260.6 billion for the first two months of 2017, up 25.5 percent from the $207.7 billion recorded in the first two months of 2016.

This strength in imports so far this year has, in turn, largely been driven by oil. Not only have global oil prices risen significantly on the year, but the volume of China's oil imports has also been near record levels. China imported an average of 8.26 million barrels per day in February, up from 8.01 million bpd in January and not far below the all-time record of 8.57 bpd recorded in December.

The Merchandise Trade Balance is the difference in value between imported and exported goods. Data are denominated both in U.S. dollars and renminbi. A positive number indicates a surplus meaning 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.