A SURPRISINGLY large decline in exports pushed China’s trade balance €24 billion into the red, data showed yesterday, the largest deficit in a decade in the world’s second-largest economy, which is more used to massive surpluses.

The country’s combined trade deficit reached €3.24 billion in the January-February period after offsetting a trade surplus of €20.8 billion in January, and analysts do not expect much vigour in exports until later this year. The overall picture was mixed. Import growth was up 39.6 per cent year-on-year in February, the strongest in a year, and more than twice the rate of export growth of 18.4 per cent.

China’s quarterly economic growth is forecast to slow to just over 8 per cent in the first quarter from 8.9 per cent in the previous quarter, marking the fifth consecutive quarter of slowdown. This puts China in line for its slowest full year of growth in a decade, although it will still most likely outstrip the government forecast of 7.5 per cent.

Zhou Xiaochuan, the governor of China’s central bank, told the country’s annual parliament, the National People’s Congress, that a trade deficit in the first two months of this year, as well as its impact on the exchange rate of the renminbi in the forex market, was a “good thing” for China.

Supply and demand was playing an increasing role in deciding the exchange rate of the Chinese renminbi currency, he said. Asked if he thought the yuan’s appreciation had come to a close, Mr Zhou said it was “not a simple process”.

He cautioned that a slow world recovery process and the unstable economic and financial situation in Europe will be the biggest uncertainties for China’s economy this year, and the plight of other major developed countries was an important factor that would influence China’s monetary policy.

Wang Tao at UBS said that both exports and imports showed further slowdown in the January-February period. “We think both have likely bottomed, and expect the seasonal deficit to give way to surplus from April onwards.