China Reports Unexpected February Trade Deficit

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Data from the Chinese government showed a $7.3 billion trade deficit for the month of February on Thursday, as imports grew 19.4% while export growth was modest at 2.4%.A distortion was expected due to the Chinese Near Year celebrations during the month, and both imports and exports were projected to be much lower than the 51% import growth and 37.7% export growth recorded in January, when China had a $6.5 billion surplus. The deficit recorded for the month was China's largest in 7 years, and its first since last March. China's trade surplus has fallen for 2 straight years, to $183 billion in 2010 from $196 billion in 2009, and from a record $290 billion in 2008. The Chinese government has stated it is trying to rebalance its trading relationships and move its economy away from being overly export-reliant by encouraging more demand within its borders. And it seems to be working; Chinese consumption has been growing at a 20% year-over-year rate, out-pacing growth in exports. A smaller Chinese trade surplus will alleviate some of the pressure from the U.S. government to allow China's currency, the yuan, to appreciate. President Obama and Treasury Secretary Tim Geithner as well as other prominent American politicians have urged China to let its currency appreciate naturally on free-floating exchanges, primarily because of China's large trade surplus with the United States.

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