China hits largest trade deficit since 1989

PanARMENIAN.Net - China had its largest trade deficit since at least 1989 last month as Europe's sovereign-debt turmoil damped exports and imports rebounded after a weeklong holiday, Bloomberg reported.

The shortfall was $31.5 billion, the customs bureau said. Imports rose 39.6 percent from a year earlier, after a 15.3 percent slump in January, while exports increased 18.4 percent, the bureau said. Data in the first two months are distorted by the timing of the Lunar New Year holiday, which fell in January this year and February in 2011.

The data, along with lower-than-forecast inflation, industrial output and retail sales, raise the odds PremierWen Jiabao will ease policies to support growth in the world's second-biggest economy. Commerce Minister Chen Deming's warning last week that boosting trade by 10 percent this year will require “arduous efforts” may also signal a slower pace of yuan gains as policy makers seek to aid exporters.

“Easing inflation and weakening economic activity send a strong signal for further loosening in the upcoming months,” said Shen Jianguang, Hong Kong-based chief greater China economist for Mizuho Securities Asia Ltd.

The government is likely to cut banks' required reserves in March, the third reduction in four months, while appreciation in the yuan will be “difficult,” said Shen, who previously worked for the International Monetary Fund and European Central Bank.

China has allowed its currency to weaken against the dollar this year, aiding exporters, as Europe's debt crisis clouds the outlook for overseas sales. Chen, speaking to reporters said the yuan exchange rate is in a reasonable range.

The nation may “appropriately” widen the yuan's trading band to better reflect market supply and demand, People's Bank of China Governor Zhou Xiaochuan said, according to a report by the official Xinhua News Agency.