China's Trade Surplus 63% Down

China's oft criticized trade surplus fell dramatically last month in an unusually weak period for exports which nonetheless underlined a wider slowdown, official figures revealed yesterday.

Analysts predicted that the figures would rebound as the economy recovered from disruption caused by fierce winter blizzards and an early lunar new year, which shifted production patterns.

They acknowledged that the United States sub-prime crisis, the rise of the yuan and increasing costs of production were also taking their toll. The producer price index rose 6.6% last month - its fastest increase in over three years.

According to the customs bureau, China's trade surplus fell by a staggering 63% compared with the previous February, to $8.56bn (£4.24bn) - between a half and a third of the level predicted by economists. In January it stood at $19.5bn.

"We expect the export figures to rebound in March, but continue to anticipate a more moderate slowdown in export growth over the course of the year," Jing Ulrich, JP Morgan's chairwoman of China equities, said in a report to clients.

China's imports in February soared 35% compared with the previous year, to $78.8bn, owing in large part to its thirst for raw materials and production equipment. Export growth tumbled from January's 26% to 6.5%.

Exports to the US fell 5% in February to $16.4bn, while imports of American goods jumped 33% to $6.1bn.

The US and the EU are pressing it hard to curb the trade surplus. Critics argue it is practicing protectionism through trade barriers and currency controls. Chinese leaders insist they are trying to build domestic consumption to create a more balanced economy. The yuan has risen by 16% against the dollar since mid-2005 and Premier Wen Jiabao said last week that China would pursue a more flexible exchange rate.

The rise in imports from the US may help China keep down the surge in consumer price inflation, which hit an 11-year high of 7.1%. Tomorrow's figure for February is expected to be even greater.