China January trade surplus at record 370 bn yuan as imports drop

Imports to China fell 19.7 percent in January from a year earlier to 860 billion yuan ($138 billion), the largest drop in more than five years (AFP Photo/Goh Chai Hin)

China's monthly trade surplus rose 88 percent to reach a record 370 billion yuan ($59 billion) in January, data showed Sunday, as imports dropped sharply on lower commodity prices and sluggish domestic demand. Exports from the world's second-largest economy also fell -- by 3.2 percent year-on-year -- to 1.23 trillion yuan ($197 billion), the customs administration said on its website. Imports fell 19.7 percent from a year earlier to 860 billion yuan ($138 billion), the largest drop in more than five years. The country's trade surplus, long a source of tensions with its trading partners, rose above a previous all-time monthly high of $54.5 billion posted in November. Economists said the figures reflected continued downward pressures on China's economy, which grew at its slowest pace in 24 years last year and is expected to slow further in 2015. But they also warned that the data may have been affected by short-term factors, such as a crackdown on commodity financing and the later date of China's Lunar New Year holiday this year. The trade surplus soared 47.2 percent in 2014 to a record $382.46 billion. China's huge trade surpluses were long a source of friction with the United States as the workshop of the world pumped out manufactured goods and US debt mounted, but the issue has receded in more recent years. China's economy grew 7.4 percent in 2014, its weakest for almost a quarter of a century, and slower than the 7.7 percent in 2013. "China's manufacturing sector is under great pressures as both external and domestic demand remains sluggish," Li-Gang Liu, Greater China economist for Australian bank ANZ, said in a statement. "Today's poor trade data could add depreciation pressures on the RMB exchange rate," he added. Exports to the EU fell by 4.4 percent year-on-year in January, while imports fell by 6.9 percent, the customs data said. The fall in Chinese imports was led by a decline in imported iron ore and crude oil, the data showed, in part reflecting recent low prices for commodities such as oil. "The much weaker than expected import data not only reflects the fall in commodities prices but also implies weakening domestic demand," Japanese finance company Nomura said in a note. The trade data was consistent with a official survey last weekend showing manufacturing activity contracted for the first time in more than two years, suggesting weakening growth momentum, Nomura said. - Further slowdowns ahead - China's leaders are trying to pull off a managed slowdown of the Asian giant to make growth more sustainable and led by consumer spending as in other major economies. The slowdown last year prompted some intervention by authorities to establish a floor on growth even as they tout a retooling of the country's economic model that is expected to result in further slowdowns in the years ahead. Such intervention has continued this year, with the central bank announcing Wednesday an across-the-board cut in the percentage of funds banks must hold in reserve. That move followed the bank's decision in November to cut benchmark interest rates for the first time in more than two years. Premier Li Keqiang has said publicly that weaker GDP growth is no problem so long as its quality remains high and job creation remains resilient. Creating jobs in the world's most populous country is a political priority for the ruling Communist Party, which depends largely on economic growth to bolster domestic support.

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