The trade surplus fell for the first time in almost a year thanks to the snowstorms, the Lunar New Year and undoubtedly the slowdown in America. China's customs bureau said yesterday that the trade gap fell 64% compared to February 2007 to just $US $8.56 billion, after rising 23% in January.
Exports rose 6.5% in February, the slowest pace in almost six years. But that's misleading as the February 2007 level of shipments was 52% higher and boosted by exporters bringing forward their sales to beat tax changes. Reuters and Bloomberg said that for the first two months combined, the surplus fell 29% to $US28 billion from the first two months of 2007.
Exports to the US were $US15.5 billion, lower than the $US19.2 billion in January and $US16.3 billion a year earlier. Seen in that context, it's not such a large fall. China's week-long Lunar New Year holiday also started earlier this year than last, and exporters brought forward February shipments to January to generate sales and cashflow.
The 35.1% rise in imports (compared to February 2007), after the 27.6% rise in January was a more interesting figure as it shows the continuation of the upturn in imports evident from around August-September last year. And inflation as measured by China's Produce Prices rose last month after the snowstorms disrupted supplies of fuel such as oil and coal and food.
Producer prices of crude oil soared 37.5%, while raw coal climbed 19.4%. Food, one of the key drivers of consumer-price inflation, rose 11%. Producer-prices have now risen for seven straight months. The outcome was less than the 6.9%, Bloomberg estimated in a survey, and the trade surplus was significantly under the $US22 billion plus also estimated in a Bloomberg survey.
This would indicate that the pressures on both prices and the trade account were perhaps one-offs in duration.. Certainly economists and analysts will be looking for signs of exports rising this month and into April and the trade surplus expanding, and for producer price growth to slow as supplies of essential products return to normal.
China has stopped coal exports for an indefinite period of time while it rebuilds stocks at power stations and in the supply chain. That has seen coking coal prices soar on the Asian spot market. That and the continuing high level of world oil prices could have an impact within China (testing the government's price controls once again) and embed inflationary pressures.
And if the trade surplus continues to run at levels under 2007 and prices remain high, then we can start thinking that the huge China boom has run into a bit of trouble, and that in turn could mean trouble for us in Australia. It's why China continues to be the biggest influence on Australia, the credit crunch nothwithstanding.
