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In a twist, China posts a trade deficit

April 10, 2010 |  1:08 am

China reported its first monthly trade deficit in six years Saturday.

The unusual news comes as the country's trade partners -- namely the United States -- have been clamoring for Beijing to reduce its trade surpluses by strengthening its currency.

The March shortfall stood at $7.24 billion, China's first trade deficit since April 2004, according to China’s General Administration of Customs.

Don’t expect it to last. The March figures were influenced by special circumstances.

Exports tailed off because the national Chinese New Year holiday landed late in February, encouraging manufacturers to accelerate work on orders that ordinarily would have shipped in March. As a result, exports in March grew only 24.3% from a year earlier. In February, they had increased 45.6% from February 2009.

Meanwhile, imports surged 66% in March from a year earlier compared with 44.7% in February.

China’s stimulus and infrastructure spending has fueled massive commodity sales. Buyers are guarding against already rising prices by stockpiling oil, iron ore and soybeans.

Exports are expected to rebound in the coming months and the pace of import growth should slow down with the central government tightening bank lending.

A continued recovery in exports could help support an eventual appreciation of the yuan.

“A return to the policy of gradual [currency] appreciation would allow China to mitigate imported inflation and promote domestic consumption by boosting household purchasing power in local currency terms,” Jing Ulrich, a J.P. Morgan analyst in Hong Kong, said in a research note Saturday.
Recent speculation of an imminent currency shift grew after U.S. Treasury Secretary Timothy  F. Geithner had a surprise meeting in Beijing on Thursday with China’s Vice Premier Wang Qishan.

-- David Pierson