Onlookers watch from a harbour wall as the largest container ship in world, CSCL Globe, docks during its maiden voyage, at the port of Felixstowe in south east England, January 7, 2015. Photo: Reuters/Toby Melville/File Photo

China unexpectedly posted a rare trade deficit in February as imports surged far more than expected to feed a months-long construction boom, driven by commodities from iron ore and copper to crude oil and coal.

Imports in yuan-denominated terms surged 44.7% from a year earlier, while exports rose 4.2%, official data showed on Wednesday.

That left the country with a trade deficit of 60.63 billion yuan (US$8.79 billion) for the month, the General Administration of Customs said.

Customs has not yet published dollar-denominated trade figures, on which most economists and investors base their forecasts and analysis.

Apart from currency fluctuations, higher commodity prices and the timing of the long Lunar New Year holidays early in the year also may have distorted the data. Most of China’s commodity imports grew strongly in volume terms from a year earlier, but dipped from January.

Still, economists say the upbeat readings reinforced a growing view that economic activity in China and globally picked up in the first two months of the year.

That could give China’s policymakers more confidence to press ahead with oft-delayed and painful structural reforms such as tackling a mountain of debt.

Containing the risks from years of debt-fueled stimulus and heavy spending has been a major focus at the annual meeting of China’s parliament, which began on Sunday.

China’s first-quarter economic growth could accelerate to 7% year-on-year, from 6.8% in the last quarter, economists at OCBC wrote in a note on Monday, while adding that the pace may ease starting in spring.

“We suspect that this largely reflects the boost to import values from the recent jump in commodity price inflation, but it also suggests that domestic demand remains resilient,” Julian Evans-Pritchard at Capital Economics said in a note.

“Looking ahead, we expect external demand to remain fairly strong during the coming quarters, which should continue to support exports.”

But he added that it was unlikely the current pace of import growth can be sustained as the impact of higher commodity prices will start to drop out of the calculations in coming months.

Analysts polled by Reuters had expected February shipments from the world’s largest exporter to have risen 12.3% in dollar-terms, an improvement from a 7.9% rise in January.

Imports had been expected to rise 20%, after rising 16.7% in January. Both export and import growth were seen at multi-year highs.

Analysts were expecting China’s trade surplus to have risen to US$25.75 billion in February, versus January’s US$51.35 billion, with growing attention on its large trade surplus with the United States as new US President Donald Trump ramps up his protectionist rhetoric.

China has not posted a trade deficit in dollar terms since February 2014.

China has trimmed its economic growth target to around 6.5% this year, Premier Li Keqiang said in his work report at the opening of parliament on Sunday. The economy grew 6.7% last year, the slowest pace in 26 years.

As in 2016, China did not set a target for exports in 2017, underlining the uncertain global outlook, but Li said China will take steps to steady exports this year.

China’s shipments to the United States rose 11.5%  in February in yuan terms, compared to a year earlier. It imports from the US rose 41.0% .

The yuan has lost about 5% of its value against the dollar since early 2016.

In the early days of his presidency Trump hasn’t made good yet on his campaign pledges of greater protectionist measures, but analysts say the specter of deteriorating US -China trade and political ties is likely to weigh on confidence of exporters and investors worldwide.

The US International Trade Commission said last Friday it had made a final finding that the US industry was being harmed by the dumping and subsidization of imports of carbon and alloy steel cut-to-length plate from China.

A government adviser said last month that China’s exports would likely return to growth this year, as commodity prices stabilize and the impact of the appreciation in the US dollar is gradually absorbed.


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