China falls into trade deficit in March, but surplus with US widest in over a year

China's trade surplus with the rest of the world vanished in March, but some economists were quick to ascribe that to seasonal quirks in the data, predicting that it would soon reappear.

Furthermore, the bilateral trade deficit with the US in fact widened last month, reaching $15.4bn - its highest level in over a year.

In local currency terms, Chinese export growth slowed from a 36.2% year-on-year clip for February to -9.8% in March (consensus: +8.0%), according to the customs administration, although import volumes held-up better, rising by 5.9% year-on-year after a dip of 0.2% in the month before (consensus: 7.5%).

However, the chief factor behind the weaker-than-expected turnout in China's trade with the rest of the world was the fact that in 2018 the Lunar New Year holidays fell in March, which is later than usual.

Indeed, Julian Evans-Pritchard at Capital Economics estimated that adjusting for seasonal factors export volumes in fact only slipped by 0.8% over the month, after a 3.0% increase in February - leaving outbound shipments at a near record level, reflecting "strong" foreign demand.

Expressed in US dollars, China fell into a trade deficit of $4.98bn for March, which was not unusual for any given month during the first quarter, he added.

To take note of as well, the research boutique further pointed out how although the Asian giant's surplus with most other countries had declined over the past two years, that with the US was near record highs.

"The biggest risk going forward is clearly that the current trade tensions escalate to the point where meaningful tariff barriers are erected. But even if this is avoided, trade looks likely to soften slightly over the coming quarters given that global growth now appears past its peak and China’s own economy faces rising headwinds from tighter policy."