beyondbrics

Chinese trade figures released on Thursday showed a surprise deficit in February, as the Lunar New Year pushed up imports and weighed on exports. The deficit came in at $7.3bn compared to an expected surplus of $4.95bn, according to Reuters.

A closer reading of the NPC runes may well have saved some blushes.

Chen Deming, China’s commerce minister, said just this week that China wanted to ”stabilise exports, grow imports, and shrink the trade surplus.” Meanwhile Yi Gang, the central bank governor, described the renminbi exchange rate against the dollar as being at its “closest to equilibrium”.

Such official statements ahead of big Chinese data releases are often a strong indicator of what’s to come.

The usual caveat is that this was the month of Chinese New Year – when data predictions become extremely hard to get right. And, data releases during, or ahead of politically sensitive events (state visits, international summits, the NPC) are often closely tied to policy.

Beijing has the ability to speed up or slow down its commodity imports as a way of nudging the trade balance in a particular direction.

It’s also worth noting that the rising oil price could well have prompted an increase in Chinese buying, as Leslie Hook noted in her piece on the recent oil spike.

One swallow doesn’t make a summer. More monthly deficits will be needed in coming months to show a real change in China’s trade balance. But ignore the signals at your peril. With the renminbi approaching the level of appreciation at which the Chinese manufacturing lobby says it can no longer cope,  the focus looks firmly on weaker trade, not a stronger currency.

Small wonder that the Aussie dollar – a common proxy for the renminbi, is the region’s biggest faller – down over 0.5 per cent, while Rmb 12-month forwards are back down to a two week low.