China: Trade deficit likely to be transient - Nomura

Research Team at Nomura expects China’s import growth to moderate in the near future, because of structural headwinds in the economy and an unfavourable base effect for commodity prices ahead and therefore, they believe the unexpected trade deficit in February will be merely transient.

Key Quotes

“Strong imports have possibly been driven by gains in domestic demand and commodity prices, while weak exports are mainly owing to front-loading in January.”

“The unexpected trade deficit is unlikely to last long, as import growth may slow on headwinds in domestic demand and a likely moderation in commodity price inflation.”

“We have raised our 2017 import growth forecast to 6.0% from 2.2% originally on strong February data, but maintain our export forecast.”

“We maintain our forecast of real GDP growth slowing to 6.5% in 2017.”