Official data showed on Thursday that China recorded a surprise trade deficit in February, causing Asian markets to drop on fears that monetary tightening in the country is taking a toll on economic growth.
While China's exports rose only 2.4 percent in February on annual basis, imports gained 19.4 percent, the customs agency data showed on Thursday. Both figures were lower than market expectations. The consensus estimate for exports gain was 26.2 percent while imports were expected to rise 32.3 percent.
The People’s Bank of China (PBOC) has hiked reserve rates for banks seven times in the past 12 months and hiked interest rates twice since October in a bid to rein in inflation.
The new trade data goes some way in proving that the government's efforts to rein in inflation have returned results. The government, which unveiled its 12th Five-Year Plan last week, said the focus will now be on checking inflation and promoting equitable development. There will be more thrust on development rather than growth, the government said.
Also, the trade deficit will reduce international pressure on China to let its currency, yuan, appreciate against the U.S dollar. Rising Chinese trade surplus was at the center of a controversy last year which threatened to become an international trade war.
However, economists have said the Chinese trade deficit in February is rather an anomaly and that the country will soon return to surplus. Economists have also pointed out that an exports slump in the beginning of the year is quite normal in China as business activity is heavily affected by the Chinese New Year Holiday.