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TRADE WARS
China returns to trade deficit in February

by Staff Writers
Beijing (AFP) March 10, 2011
China said Thursday it had returned to a trade deficit in February for the first time in nearly a year, as the world's number two economy tries to wean itself off reliance on exports.

The trade deficit of $7.3 billion -- the country's first since March 2010 and only the second in nearly seven years -- compared with a surplus of $6.45 billion in January, customs authorities said in a statement.

China had a surplus of $7.61 billion in February last year.

Customs blamed a sharp slowdown in exports on the Lunar New Year holiday, which fell in early February, while imports remained strong due both to increased shipments of oil and other commodities, and their rising prices.

Analysts however said the result was likely a blip on the radar screen that would not silence calls from abroad for a stronger yuan.

Exports rose just 2.4 percent in February from a year earlier to $96.74 billion and imports gained 19.4 percent to $104.04 billion. Analysts had expected a February surplus of $3.9 billion, according to Dow Jones Newswires.

In January, exports rose 37.7 percent while imports grew 51 percent.

Analysts said exports and imports typically see strong growth ahead of the festive season when factories crank up production to meet demand, and then slow in the following month.

"This is not a big surprise," UBS economist Wang Tao told AFP, adding that the trade deficit would be "temporary" because China tends to import more at the beginning of the year.

"Exports tend to be very strong at the end of the year," she said, adding that the data would not dampen calls from China's key trade partners in the United States and Europe for a stronger currency.

Morgan Stanley economist Wang Qing said the combined January and February trade data better reflected the "big picture", showing exports grew 21.3 percent year-on-year and imports were up 36 percent.

The combined two-month trade deficit stood at $890 million, customs authorities said.

"China will likely return to surplus in the next few months," said Alistair Thornton, an analyst at IHS Global Insight, noting there is "a lot of volatility in trade data".

Investors reacted negatively to the data, with the Shanghai Composite Index closing down 1.50 percent to 2,957.14.

Commerce Minister Chen Deming warned this week China could return to a trade deficit this year, noting "many international uncertainties" could hurt demand for exports.

"This year imports will grow at a rapid pace -- faster than that of exports," Chen told reporters on the sidelines of the country's annual parliamentary session.

Premier Wen Jiabao said in his speech to open the annual session on Saturday that Beijing was aiming for a more balanced eight percent growth in 2011 -- a figure seen as key to staving off social unrest.

The country is targeting a slower-paced seven percent growth over the 2011-2015 period, as China tries to move to a more sustainable growth path via higher domestic consumption and less reliance on exports and investment.

China recorded a hefty trade surplus of $183.1 billion in 2010 compared with $196.1 billion in 2009.

Beijing is under pressure to loosen its grip on the yuan, which critics say is grossly undervalued and gives its exporters an unfair trade advantage.

China's currency policy has been a thorn in the side of ties with the US and will be a key issue for America's new ambassador to Beijing.

US President Barack Obama on Wednesday nominated Commerce Secretary Gary Locke to be the first Chinese-American ambassador to Beijing, replacing Jon Huntsman.

Senators have indicated they are likely to confirm Locke's appointment, but that lawmakers would use the occasion to scrutinise US-China relations.




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TRADE WARS
Indian state challenges govt over Vedanta mine
Bhubhaneswar, India (AFP) March 9, 2011
The Indian state of Orissa has filed a Supreme Court case challenging the national government's decision to block Vedanta Resources' plan to mine bauxite in the region. Last August the environment ministry in New Delhi struck down plans by the state-owned Orissa Mining Corporation (OMC) and Vedanta subsidiary Sterlite Industries to mine bauxite to supply Vedanta's nearby aluminium refinery. ... read more

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