Chinese February Trade Surplus Drops So Much It Becomes Deficit, Largest In 7 Years

Tyler Durden's picture

After China was expected to post a $4.9 billion February trade surplus, the centrally planned economy demonstrated just how easy it is to shut all CNY "undervaluation" critics up, by posting a miraculous $7.3 billion trade DEFICIT in February, which just happened to be the largest in 7 years, following January's surging surplus. The result was due to a general contraction in both exports and imports during the month, but obviously a much larger drop in the former - Exports growth decelerated to 2.4% Y/Y in February (consensus forecast: 27.1% yoy) , down from 37.7% yoy in January. The implied month-on-month; seasonally-adjusted; annualized (s.a. ann.) growth rate was 40.7%, down from the 74.0% growth recorded in January. At the same time imports growth softened to 19.4% yoy in February (consensus forecast: 32.6% yoy) , down from 51.0% yoy in January. On a M/M seasonally adjusted annual basis, imports growth was 58.3% in February, down from 101.8% in January. And as the chart below shows, while February is traditionally the weakest export month for China, this level of surprise can only be attributed to political determination to once again shut up CNY critics, as the case that the renminbi is undervalued goes out of the window should this level of deficits persist. As for the party line, where something is always blamed for everything, this time it was the Lunar New Year's fault.

From Goldman:

The apparently weak exports and imports data in February was mostly because of the Lunar New Year effects. This data should be viewed in light of the exceedingly strong January trade data which represented frontloading of trade (especially exports) ahead of the New Year  February 3 this year). The combined January-February data still showed robust sequential growth. We expect both exports and imports growth to show meaningful improvements in March as the Lunar New Year effects gradually fade and last year’s base was low (the Lunar New Year was late on February 14 last year and March exports data was more seriously distorted on the downside as a result).

We believe the trade deficit is likely to be a temporary phenomenon distorted by the Lunar New Year. During the several weeks following the Lunar New Year the holiday, distortions affect exports much more than imports because exporters have a much greater tendency to take extended holidays. As a result, there has been a clear tendency for deficit/low net exports to occur at the start of the year and the level of net exports tends to rise within the year. In 2010, the only monthly trade deficit occurred in March 2010 (the level was US$7.4 billion, almost the same as this February) because the Lunar New Year was late but eventually rose to a surplus of US$27 billion in October 2010. There is also a cyclical factor which tends to push up the level of net exports in the coming months: as China continues to tighten, its domestic demand will likely show a further slowdown which tends to lower China’s imports growth as a large share of the latter are for domestic consumption/investment.

A far more credible explanation is that of Bank of America which blames the plunge on surging oil:

Bank of America-Merrill Lynch estimates that each $1 increase in oil prices per barrel may cut China’s annual trade surplus by $1.9 billion. Oil climbed today in New York as violence in Libya renewed concern that supplies are under threat.

Yet the ultimate purpose of this doctored data is of course political.

“I think this is probably the end of the currency wars,” Tim Condon, Singapore-based head of Asia research with ING Groep NV, told Bloomberg Television. He said the deficit was “a move everyone wants to see” and addressed key concerns of the Group of 20 nations relating to economic imbalances.

Brazil Finance Minister Guido Mantega popularized the term “currency war” last year to describe nations securing export advantages by suppressing the values of their currencies.

And some charts showing the collapse in the world's marginal growth driver.

Total China monthly trade:

Total trade by key country - note the rather distinct plunge in February exports to the US and UK.

China-US trade balance:


And China-Rest of the World:

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Sudden Debt's picture

This is what you get when the Gold & Silver Imports ARE BIGGER THEN THE PLASTIC CRAP THEY EXPORT!


reminds a bit of these projects they call "FAIR TRADE" over here where you can buy crap from the developped world for twice the price you pay in common retail.

I guess they have something just like it but with a inverse policy.


morph's picture

If you look at the chart there is a dip at the same time every year. The new year shuts China down for 10 days or so.

Saxxon's picture

Yes Morph and it really shuts down hard.  Westerners on the hamster wheel (particularly in the United States where our holidays ((Holy Days)) are mere Monday add-ons and all semblance of regard to tradition and ancestors is whored out by the media) cannot understand the extent to which commercial activity halts in the PRC during that holiday.

Nice gap down in the metals but I somehow don't like this dip.  If the PRC is rocking to a close (they are the last bull) we will see more downside.

Head for the Hills's picture


Selling cheap manufactured crap, undercutting manufacturing in the US and Europe and then turning around and spending the proceeds to buy out all the commodities to deliver a second blow to US and European manufacturers by driving up raw material prices can hardly be called trade.

Brilliant strategy  for the Chinese and incredible stupidity for governments that allow this evisceration to be done to them.


Oh regional Indian's picture

Too funny. China posts a NUMBer and the world gets...shall we say, excited?

Look at how much importation of core commodities alone has accelerated in the past six months by them. 

Interesting, as globalization dies it's natural death, deficits are going to be the order of the day.

India's surplus is so "light" (all service sector driven), it can vanish in a heartbeat.

Currency wars are over.... had a good laugh when I saw that.


FreedomGuy's picture

The currency wars are over when China allows its currency to float freely and no longer pegs it to the dollar. Until then it is anyone's guess what it is really worth anywhere. So critics on both sides, i.e. undervalued vs properly valued can continue their arguments ad infinitum.

Drachma's picture

Does this have anything to do with the Chinese Girls Dating Website.

overmedicatedundersexed's picture

time to sum gum QE and stimulate internal economy mr Hu.

Flakmeister's picture

This is also what you get you are import more than 50% of the oil you burn...the ratio is very similar to the US....

Small factoid: Germany and France import less oil than they did in the 1970's... on a per capita basis the drop is quite dramatic.

FreedomGuy's picture

They do a lot of nuclear, particularly the French and they also tax gasoline up to about $8 per gallon. The cars probably get two to three times the mileage they did back in the 70's and mass transit is better organized. I personally don't favor too many of those things or they wouldn't fly here very well.

Flakmeister's picture

Can't question the American way, can we? Non-negotiable I am told...

Aside: There is something exhilirating about going 175 mph through the French countryside knowing that the only fossils fuels being used are the lubricants and the plastics in the train and those inputs into building the infrastructure.

bunkermeatheadprogeny's picture

You can't eat plasma widesrcreens.

TBT or not TBT's picture

Oh, and commodity prices are way up across the board, and not only do they import a lot of shit, they are a primary driver for some of that demand, even piling the stuff over there in lieu of FRN's and EUROs and AUDs if you listen to some commentators here.   That couldn't have anything to do with it, could it?     Yeah it could.   Let's pause to note that not all, by a long shot, of those imported commodities go back out transformed into trade goods.  They've been building psychotic quantities of urban housing that no one there can afford, to the point where it is visible from space.   Malinvestment.   Big Time.

eddiebe's picture

So now that they are not running a trade deficit with the U.S. anymore that means they don't buy anymore T bonds. In fact now they have the 'cover' to sell them, to make up their 'trade deficit'.

 Brilliant. they are learning how to fuck back.

 This will also give Bennie cover to keep the Qe going.

The bond is toast

eddiebe's picture

How do you say 'voodoo economics' in chinese?

Youri Carma's picture

China unexpectedly swings to February trade deficit, 10 March 2011, by V. Phani Kumar - Hong Kong (MarketWatch)


The deficit might have implications for the pace at which China allows the yuan to appreciate against the U.S. dollar, say economists.

“One thing we are more certain about [from the data] is that China’s trade surplus is mostly likely to decline at a faster rate than anyone expected this year... A much smaller trade surplus means that the external pressure on yuan appreciation would be less,” said Wei Yao, China economist at Societe Generale in Hong Kong.

February’s deficit was China’s largest in seven years, according to Reuters.


B. of A. Merrill Lynch’s China economist Ting Lu wrote to clients that taking January and February figures together, China’s imports grew 36%, while exports accelerated at 21.3%.

“China’s trade balance could be back into surplus again in coming months after the distortion in Jan-Feb, but surging oil prices could add pressures,” Lu said, adding that a one dollar per barrel increase in oil prices could cut China’s annual trade surplus by $1.9 billion.

“On the positive side, the falling trade surplus might alleviate pressures on the [yuan] and also the need for the People’s Bank of China to hike required reserve ratio to lock liquidity,” he added.


AnAnonymous's picture

A much smaller trade surplus means that the external pressure on yuan appreciation would be less


I doubt the US citizens change their mind because of the chinese trade deficit.

THE DORK OF CORK's picture

A huge trade surplus is a hallmark of a colony - perhaps China is finally becoming a superpower now.

Germany and Ireland are still the bankers favourites - both with huge trade surpluses but not unlike  siamese unborn monetory twins - one huge and growing and the other tiny and shrinking as the large sibling takes all the nourishment.

A miscarriage awaits.

Youri Carma's picture


Yuan retreats from record high, stability seen key, 8 March 2011, (Reuters)

Excerpt:   Yuan appreciation in a year's time fell to 2.42% from 2.57%. The dollar/yuan exchange rate can trade up or down a maximum 0.5% in a given day from the mid-point, which is used by the PBOC to express the government's intentions for the currency.

The market widely expects the Chinese currency may rise 5%-6% this year as the government appears to be using the exchange rate to fight inflation.

papaswamp's picture

So the US report shows the exact opposite of the China report...someone is fudging numbers.

monopoly's picture

Is any of this a surprise to us here at Zero Hedge. For those of you who are still questioning what is coming down, there is the dip to buy in miners and gold.

Ted K's picture

If Tyler Durden and cohorts actually believe that deficit number, put out by a government that tells more daily lies than the rest of the international community combined, I'm going to have to question any number/statistic put out by Durden and Co. from here on out.  And that is not said facetiously.

f16hoser's picture

Keep buying our debt, Chink! We'll pay you back after the next war!

oh_bama's picture

This is not real guys.

This year, as chinese became a lot richer, they value their family time, holiday time a lot more than money. A clear sign of moving into middle class society. And therefore a lot less selling and a lot mroe buying.

The overly negative people need to wait at least a month or two before concluding anything..

You guys are too negative an unamerican. Cheer up and BTFD!!


Vampyroteuthis infernalis's picture

Oh_bama, are you backing up your fellow troll Hamy? Yeah, Hamy how is your crapple stock doing today?

spanish inquisition's picture

They should be able to write down 200-300 billion of treasuries over the next 5 years to offset any surpluses. (I am pretty sure accounting rules don't' matter anymore)

Xkwisetly Paneful's picture

Believe any of these government supplied stats especially from China need to go see a medical professional.

partimer1's picture

You already forgot the cardinal rule:  they can be whatever the fck they want them to be! who's checking?

bankruptcylawyer's picture

i bet if you tallied up all the balance of trade reports from all nations, you'd find that there were substantial discrepancies between everyone's trade flows and that some countries' were reporting things differently from other countries. 

if you didn't find that, then it is hard to imagine everyone being both accurate and telling the truth. if every report was in perfect agreement with each other, perhaps someone at the WTO, WB or BIS was massaging and managing the data reporting process. 


i'd like to see someone balance all nations' reports on a slide show in a simple and straightforward manner is all i'm saying.

TheGoodDoctor's picture

I guess this shows just how much gold, silver and natural resources that China is importing. LOL.

pokrd's picture



Imported food price is higher could be attributed to the depreciation of the USD. But if measure it in another currency you could have different results. China's inflation problem is the opposite of the US, where a currency that is kept artificially weak is driving higher food prices.  


Similarly it is interesting to note that if you measure the oil price in another currency, it has not risen as much. For example the Oil price in Yen is still cost at equivalent to $65 per barrel.





kummar's picture

Are you really trying to say that these psychics are saying that AIG will survive and continue to be successful they way they were in 2000? Let me know what you have to say, please. My e-mail address is

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