A sizeable trade deficit – the biggest on record for the Chinese economy, in fact – has investors feeling down again. The $31.5 billion-deficit in February signals trouble ahead for an economy that relies heavily on exports as a major driver of growth. Exports only grew 6.8% compared with the first two months of 2011, down from 14.2% at the close of year. A 1.1% contraction in exports to Europe is to blame for the fall. Qu Hongbin, Asia economist for HSBC, sees bigger problems ahead. Growth in processing trade imports – the inputs China uses to make its exports – fell to 2.4% compared with a year earlier, down from 8.6% in the fourth quarter of 2011. This suggests factories are anticipating weak demand for product in the future and slowing the purchase of material.
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