* $5.35 bln surplus confounds expectations of $1.3 bln
* March exports up 8.9 percent y/y, beat consensus +7.2 pct
* Imports up 5.3 percent y/y, below consensus +9.0 pct
* Exports to U.S. up 10.4 percent vs year ago
By Nick Edwards
BEIJING, April 10 China returned to an
export-led trade surplus of $5.35 billion in March, heralding
the prospect that a rebound in the global economy is lifting
overseas orders just in time to compensate for a slowdown in
The surprise return to surplus from February's $31.5 billion
deficit confounded expectations that trade would remain $1.3
billion in the red, with a solid 10.4 percent year-on-year
bounce in sales to the United States helping exports grow faster
than expected, customs data showed on Tuesday.
Imports undershot expectations, growing 5.3 percent on the
year in March - consistent with other data suggesting soggy
domestic demand in the first quarter of the year - but the trade
numbers overall reinforced the view of analysts that China's
trade-sensitive economy is set for a soft landing in 2012.
"The key point is that the export growth was up from 6.8
percent year-on-year in the January-February period," Dariusz
Kowalczyk, an economist with Credit Agricole CIB in Hong Kong,
"Acceleration in exports may well be slower in volume terms,
but the data still highlights the fact that China can continue
to count on foreign demand to partly mitigate for weakening
domestic demand," he said, adding that the data implied trade
would be a net addition to economic growth in the first quarter.
Trade was a net drag on growth last year as the world's
second biggest economy turned in its slowest rate of expansion
since 2009, at 9.2 percent, with each quarter's growth in 2011
successively weaker than the previous three months.
That trend is likely to have extended to a fifth consecutive
quarter in the first three months of 2012, with analysts polled
by Reuters forecasting an 8.3 percent growth rate that sets the
economy on course for its slowest year in a decade.
"The trade data looks okay... it shows the global economy is
recovering, albeit slowly," said Zhou Hao, an economist with ANZ
Bank in shanghai.
"Given that China had a trade surplus in the first quarter
versus a deficit in the Q1 last year, it indicates a positive
contribution to GDP growth. We reckon Q1 GDP growth should be
8.6 percent. I think the market is a bit too pessimistic about
Exports to the United States - the single country with the
biggest trading relationship with China - were a particular high
point. But shipments the 27 members of the European Union - the
biggest overall market for Chinese goods - were down 3.1 percent
from March last year.
Overall, import and export growth were both down sharply
from February's Lunar New Year-distorted surge, though within
sight of the government's target of 10 percent expansion for
Import growth of 5.3 percent in March compared with
economists' expectations of 9.0 percent and February's 39.6
percent growth, while export growth of 8.9 percent compared with
a consensus call for 7.2 percent, still a marked easing from
February's 18.4 percent rate.
March data provides the first hard economic numbers of the
year not distorted by the impact of the Lunar New Year holiday
that fell in January this year, causing considerable skew in
comparisons with the February 2011 holiday.
For the first quarter as a whole, the Customs Administration
said the value of total exports was $430.02 billion, while
imports were $429.35 billion - bringing the trade account
roughly into the balance targeted by the government as it
re-orients the economy away from a focus on foreign demand.
Zheng Yuesheng, statistics chief with the Customs
Administration, told state television that China was expected to
record a trade surplus for the full year, but that the overall
size of its surplus was expected to be smaller than 2011.
China's trade surplus narrowed for a third straight year to
$155 billion in 2011, from $183 billion in 2010, $196 billion in
2009 and $296 billion in 2008. The trade surplus as a share of
gross domestic product (GDP) dropped to about 2 percent in 2011
from 3.1 percent in 2010.
But despite the unexpected return to surplus, the relatively
slack pace of export growth may still concern investors who
believe the risks of recession in the debt-ridden European Union
- China's top export market - could prove painful.
REAL ECONOMY RISKS
It will remain a concern for China's export-oriented
manufacturing sector, which has seen new orders and profit
margins slump through 2011 as the euro zone's debt crisis has
dampened global economic activity.
"Our new orders have fallen 30-40 percent this year. We are
doing our best, but frankly I don't know how long we can
maintain our business," Chen Lifeng, manager of Ningbo Tengsheng
Garments Co., told Reuters on a recent visit to his factory in
China's east coast Zhejiang province.
Rows of empty sewing machines on the factory floor - about a
third of the capacity - were testament to the tough times faced
by China's manufacturers not only from sluggish demand, but from
rising domestic wage costs and energetic foreign competition
from the likes of Vietnam, India and Bangladesh.
Exporters have been key to China's three decades of rapid
economic development, with economists calculating that 10,500
jobs are created for every $100 million of goods exported.
China's data releases build to a crescendo through the week
with first quarter GDP numbers expected to be published on
Friday and forecast to show the slowest quarter of growth in
nearly three years.
Inflation data published on Monday kept the government on
stand-by to deliver more growth-oriented policies, with a trend
of easing consumer costs in the first quarter confirmed while
producer prices revealed risks to the industrial sector
The People's Bank of China has cut the proportion of
deposits banks must keep as reserves by 100 basis points in two
moves since autumn 2011 in a bid to keep credit growing in the
face of a recent slowdown of foreign capital inflows, which had
underpinned money supply growth for much of the last decade.