China Has Unexpected Trade Surplus as Imports Moderate

China reported an unexpected trade surplus last month as import growth trailed forecasts, underscoring risks of a deeper slowdown in the world's second- largest economy.

Inbound shipments rose 5.3 percent, the customs bureau said today, below the 9 percent median estimate in a Bloomberg News survey. Exports increased 8.9 percent from a year earlier, more than forecast, leaving a trade surplus of $5.35 billion, compared with a median projection for a $3.15 billion trade deficit.

Asian stocks fell amid renewed concern about growth in China, fiscal woes in Europe and Federal Reserve Chairman Ben S. Bernanke's comment that the U.S. economy was far from a full recovery. Premier Wen Jiabao may need to balance gains in external demand with a slowdown in domestic consumption in deciding whether to add monetary or fiscal stimulus.

"The sluggish import growth shows weakening domestic demand and investment growth while exports are stabilizing," said Chang Jian, economist at Barclays Capital in Hong Kong who formerly worked for the World Bank. "Policy makers need to strike a delicate balance between preserving growth and containing inflation at this stage, yet they may tilt more toward sustaining growth in the second quarter."

In Japan, the central bank refrained from expanding monetary easing to counter deflation, resisting pressure from lawmakers who five days ago rejected a nominee for the policy board. The Bank of Japan kept the key interest rate between zero and 0.1 percent and left its 30 trillion yen ($368 billion) asset-purchase fund and 35 trillion yen credit-lending program unchanged.

The value of oil imports rose 26 percent in March from a year earlier to $20 billion, customs data show. Iron ore purchases fell 9.1 percent to $8.69 billion and steel product imports declined 20 percent to $1.68 billion. The value of goods imported for processing rose 2.6 percent to $33.8 billion.

"This should increase the chance of further loosening, as it reflects very weak import demand, thus weak domestic demand," said Shen Jianguang, chief Greater China economist for Mizuho Securities Asia Ltd. in Hong Kong, who previously worked for the International Monetary Fund and European Central Bank.

Joy Yang, chief economist for Greater China at Mirae Asset Securities (HK) Ltd., said the trade surplus may delay any additional cut in the required reserves banks must hold. At the same time, a slump in imports and the domestic economy call for an interest-rate cut to support growth, a move that's likely to happen around midyear as inflation drops, said Yang, who previously worked for the IMF.

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