China’s imports surged on higher commodity, and semiconductor prices, while export growth slowed amid weaker global demand and supply chain disruptions, narrowing the country’s trade surplus.
China’s trade surplus reduced by nearly one-fourth in March as imports (in value terms) jumped, while export growth slowed notably, with the conflict between the U.S. and Iran in the Middle East that started on Feb. 28 primarily serving as a drag.
The offshore Yuan futures contract (CNH), however, rose to its highest level in three years, with traders apparently latching onto the strong import data, interpreting it as a sign of strong domestic demand.
Offshore Chinese Yuan Futures (5-Year Chart)
Source: TradingView
More details on the domestic economy’s strength will emerge when the country releases its first-quarter GDP report Thursday.
Crunching the Numbers: Data released by the General Administration of Customs showed that imports jumped 27.8% year over year (YoY) in March, faster than the 19.8% growth in February and outpacing the 11.1% consensus growth estimate. March’s import growth was the fastest since November 2021, according to the South China Morning Post.
On the other hand, exports climbed by 2.5%, slowing markedly from the 21.8% jump in February and marking the slowest growth in five months. Economists, on average, had estimated a 8.3% increase for the month.
As a result, the trade surplus shrunk to $51.13 billion in March from $213.62 billion a month ago. In yuan terms, the trade surplus was 354.75 billion yuan versus a surplus of $1.503 trillion yuan in February. The surplus undershot expectations of $107.50 billion and 780 billion yuan, respectively.
China Import and Export Data
Source: China Customs
What’s Behind Import Surge: According to SCMP, imports received a shot in the arm from higher commodity prices, especially those related to copper products and fertilizers. The blockade of the Strait of Hormuz following the U.S.–Iran war has pushed energy commodities and refining by-products higher since early April.
Integrated circuit imports also jumped 54% in terms of value and by a far less 14% in volume terms.
Customs spokesman Lu Daliang reportedly said the conflict involving Iran had “driven a sharp and sustained rise in fuel prices, significantly increasing oil transportation costs, which were now feeding through global supply chains, pushing up production and logistics costs for goods worldwide, and were likely to weigh on global merchandise trade.”
What Economists Say: Natixis Corporate and Investment Bank Senior Economist Gary Ng said, “China’s exports have felt the heat as the Iran war starts to weigh on global demand and supply chains. “The timing of Chinese New Year may have also affected the working days in March.”
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