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China’s trade surplus fell in January because of soaring import demand, easing pressure on Beijing ahead of the G20 summit in Paris later this week.
The trade surplus fell from $13.1bn in December to $6.5bn last month, the lowest surplus in nine months, as a result of stronger-than-expected imports.
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A smaller trade surplus may reduce the pressure from the US to hasten the appreciation of China’s currency, the renminbi.
“A lower trade surplus and also very strong imports data would be good tools for China to illustrate the contribution it is making to the global economic recovery—as well as the fact that the Chinese economy is becoming more balanced,” said Yu Song, China economist with Goldman Sachs.
China’s trade surplus has narrowed in recent months on the back of domestic demand. Monday’s date showed that imports grew 51 per cent in January compared to the year before. Higher commodity prices have played a part in boosting China’s imports in nominal terms, as prices for raw materials like iron ore and copper are at or near record highs.
China’s robust export levels, which grew 38 per cent in January compared to the previous year, underscore the global economic recovery.
Economists cautioned, however, that the Chinese new year holidays could easily distort trade data for the first two months of the year.
“Some of the January strength is temporary, but it does show that the global recovery is not facing major trouble,” said Ken Peng, economist at Citibank.
China’s trade surplus and current account balance are set to be key topics for the G20 meeting in Paris later this week. At the meeting, finance ministers will discuss reforms to the international monetary system and ways to prevent global economic imbalances.
Christine Lagarde, France’s finance minister, told the Financial Times that the gathering would include a “lively debate” on China’s role in the international monetary system. France, which is chairing the meeting, supports inclusion of the renminbi in the IMF-issued virtual currency known as special drawing rights, or SDR.
Last Thursday, China’s central bank allowed the renminbi to appreciate to a record low versus the dollar, meaning that the value of the renminbi versus the dollar is at its highest in the 17 years since China created the current market exchange rate system.
Inflation has become a key concern for Chinese policy makers, who have raised interest rates three times in the last five months. January’s consumer price inflation will be released on Tuesday.
