The $7.24 billion trade deficit in March reported Saturday by China's customs administration was China's first since a $2.26 billion deficit in April 2004. Though expected, it was significantly bigger than many economists had forecast. It follows four straight months of narrowing trade surpluses.
The return to deficit after many years of surplus comes as China is being pressured to let the value of its currency rise against the dollar
- a key source of friction with the U.S. and other trading partners.
Zheng Yuesheng, chief of the customs agency's statistics department, said the 60 percent rise in China's imports in January-March, compared to a year earlier, was a boon to "the balanced growth of the world economy."
"This kind of trade deficit is healthy because it appears when exports and imports both grow rapidly," Zheng said on national television.
Zheng echoed other officials in predicting that China's trade will soon return to surplus, though he said that it will likely tend to be more balanced than in the past.
China's exports totaled $112.11 billion in March, up 24.3 percent from a year earlier. Imports reached $119.35 billion, up 66 percent compared to the same period last year, the Customs Administration said in data posted on its Web site.
In the first three months of this year, China still posted a global trade surplus of $14.5 billion, down 76.7 percent from the first quarter of 2009. The trade surplus was $7.6 billion in February and the combined January-February surplus was $21.8 billion.
The overall March deficit still shows that demand in China remains strong, driven in part by a torrent of bank lending and other government stimulus. As a result, prices for crude oil, iron ore and other raw materials China imports have been rising. Meanwhile, the Western economies that are the top export markets for Chinese goods have yet to return to solid growth, though are expected to revive later this year.
"China's trade deficit will likely prove temporary. With an anticipated recovery in developed economies this year, Chinese exports should improve gradually over the coming months," Jing Ulrich, head of China equities for J.P. Morgan, said in a note to clients.
Chinese trade officials, however, pointed to the deficit and the absence of full-throttle recovery in the global economy as reasons to keep the yuan stable. Appreciating the currency, they argue, would hurt China's already hard-pressed exporters and add more uncertainty to the world economic outlook.
"We are still very much concerned. Global demand is still weak and protectionism is rising," Chinese Vice Commerce Minister Yi Xiaozhun said at a regional conference, the Boao Forum for Asia, on Saturday.
In a separate statement, the Commerce Ministry said that the deficit shows that "the decisive factor that affects the trade balance is not the exchange rate, it's the relationship between market supply and demand and other factors."
Still, China recorded a $9.87 billion trade surplus with the United States in March and a $30.7 billion surplus for the first quarter, the customs figures showed. Imports from the U.S. rose 43 percent in March, nearly twice the pace of exports.