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China Returns to Trade Surplus as Exports Rebound -- Update

13 Apr 2017 4:55 am
By Mark Magnier 

BEIJING--China's exports and trade surplus increased more than expected in March on improved global demand, underpinning expectations that next week's read on growth in the first quarter will show steady economic momentum.

Exports increased 16.4% in March from a year earlier reversing a 1.3% decline in February, while imports rose by 20.3% compared with February's 38.1% increase, the General Administration of Customs said Thursday. That combined into a March trade surplus of $23.93 billion, compared with February's $9.15 billion deficit.

The data was roundly better than expected: Economists polled by The Wall Street Journal had forecast 4.9% growth in exports, 18.4% growth in imports and a $12 billion trade surplus.

China hasn't seen the sort of sustained monthly export growth of neighboring economies such as Taiwan and South Korea in recent months, and economists questioned whether the strong March figures are sustainable. It could take a few months for a fuller picture to emerge, they added.

"The good part is, we're seeing double-digit growth [in trade]. The bad part is, it's not sustainable," said Commerzbank AG economist Zhou Hao. "I don't think China has a big pickup in demand."

Next week's growth figures are expected to show that the economy expanded by at least 6.8% year on year in the quarter, matching fourth-quarter levels. Economists forecast that a stimulus-fueled economic boost in the first half of 2017 will tail off in the second half, though they expect China will reach its annual growth target of "about 6.5%."

While China's trade situation has improved with stronger global demand, uncertainties remain, said customs spokesman Huang Songping at a press conference.

A cloud hanging over China's trade outlook is its relations with the U.S. after Donald Trump threatened during his presidential campaign to target Beijing's trade practices. Tensions eased somewhat after a summit in Florida last week, where Presidents Trump and Xi Jinping agreed to a "100-day action plan" on trade.

On Wednesday, Mr. Trump said he wouldn't move to declare China a currency manipulator and might accept a trade deal that includes more favorable terms if Beijing helps rein in North Korea's nuclear program.

China's March exports were helped by stronger shipments to the U.S., Europe and Asia, economists said, raising hopes that global trade will accelerate this year from last year's anemic 1.3% expansion.

Trade is becoming less important to China's economy as it attempts to shift its growth model to consumption and services. Last year, exports made up 18% of China's gross domestic product, down from a peak of around 32% in 2006.

But stronger outbound shipments this year should help the world's top trading nation as Beijing gradually tightens monetary policy to address rising debt and asset bubbles, such as in its property market. In 2016, China's net exports subtracted 0.5 percentage points from overall growth, but economists expect the sector to break even or contribute modestly this year.

Dalian Everglory Co. which exports plastic flowers and glassware to the U.S., Europe and Southeast Asia, said it has been helped by a weaker yuan in recent months, but that has been offset by higher raw-material costs and more costly Chinese environmental standards.

"So it's a bit of a wash," said Yu Jing, a company representative. "But generally, things are looking up. If things work out, our export sales could increase 10% to 15% this year."

Imports in March, calculated by value, decelerated as many commodity prices fell--the price of iron ore used in making steel declined 11.9% in March over February--although still-high price levels kept the import figure in double-digit territory.

Compared to its neighbors, China's trade figures may be skewed by companies using inflated invoices to circumvent restrictions on moving money out of China, economists said. "There's a risk that exports are underplayed and imports are overplayed given capital controls," said Standard Life Investments Ltd. economist Alex Wolf.

Pei Li and Liyan Qi contributed to this article.

Write to Mark Magnier at mark.magnier@wsj.com

(END) Dow Jones Newswires

April 13, 2017 00:55 ET (04:55 GMT)

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