Chinese import volumes increase trade surplus

China's trade surplus has widened remarkably in recent quarters reflecting both falling import prices and weak import volumes.

In particular, China's oil import bill fell by US$42.9 billion from a year ago in 1Q15, contributing significantly to the US$77.3 billion widening of the merchandise trade surplus over this period.

More importantly after China's merchandise goods exports and imports in volume terms, had been tracking each other closely, import volume has moved sideways from mid 2014.

This import volume weakness, in turn, reflects the downtrend in commodity imports (especially industrial metals) since mid 2012, which in turn tracks the slowdown in domestic fixed investment growth.

But, it is not only the major commodity exporters that have felt the hit from China's demand slowdown; Chinese imports from other sources generally have been weak too, imports from the US, the EU, and Japan fell by 10-12% YTD in Q1'15.

For the rest of the year, our forecast of current account surplus to be stable.