- Nomura
China's trade plummeted in February amid sluggish global demand and a business shutdown during the Lunar New Year holiday. China's exports registered the biggest decline in more than five years, plunging 25.4% in dollar-terms year-over-year, compared with the decrease of 11.2% in January. The figure appeared to be much worse than a median forecast for a 15% drop. Imports also slid, dropping 13.8% last month, following the 18.8% decline in January. As a result, China's trade surplus shrank in February from $32.59 billion from $63.29 billion in January.
The trade data deepens concerns about the health of the world's second biggest economy. China's economic growth slowed to a 25-year low of 6.9% in 2015, debt has ballooned, while capital outflows have accelerated. China's leaders set an economic growth target of 6.5% to 7% for 2016, compared with 6.9% last year. As part of efforts to boost activity, policy makers have proposed increasing the 2016 fiscal deficit to 3% of gross domestic product, from 2015's budgeted 2.3%. Analysts also expect further cuts this year in interest rates and reductions in the amount of money that banks must hold in reserve, extending a year-long stimulus blitz. Last week China's central bank cut the RRR for banks in a bid to free up surplus cash in the banking system and underpin lending.
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