China's Trade Surplus Tumbles in March, but First Quarter Surplus Is Still A Record

China's merchandise trade balance fell sharply in March to $84.7 billion from $108.0 billion in February. Exports fell by $23.4 billion and imports rose by $0.3 billion. As the data are not seasonally adjusted, the monthly ups and downs in the first quarter of the year are frequently affected by the variations in the dates of the Chinese New Year. In spite of the decline in the March trade balance, the balance for the whole quarter was a record at $63.7 billion, $7.5 billion above the previous quarter and $30.7 above the first quarter of 2006. The first chart shows China's merchandise exports, imports and balances of trade in goods over the past five years on a quarterly basis.

The surplus with the US was $42 billion in the first quarter of this year, $2.6 billion above the previous quarter and $7.8 billion above the first quarter of 2006. The growing surplus with the U.S. has been causing friction between China and the US over the last several years and has reached the point where the US has recently increased duties on Chinese coated paper and, just yesterday, filed two cases with the WTO (World Trade Organization) to reduce barriers to US goods and to criminalize piracy. The second chart shows the widening gap between China's exports to the US and its imports from the US.

In contrast to the US, China has run a deficit with Japan as shown in the third chart. Until 2005, China also ran a deficit in goods with Germany. Since then, however, China has been recording a growing surplus with Germany as shown in the fourth chart.