HONG KONG, China — When China announced that it had recorded a $31.5 billion trade deficit in February, many speculated that the world’s second-biggest economy was losing steam.
Some took the trade deficit — the largest one since 1989 — as a harbinger of faster export slowdown. Exports form a large part of China’s gross domestic product, the theory goes, so once it drops, the country is in for trouble.
But some analysts say the negative trade balance and the likely export slowdown are not as troubling as they might seem.
For starters, one monthly trade deficit doesn't necessarily mean another is on the way. And even if exports slow down for a spell, that doesn't directly indicate anything about growth, or the lack thereof.
At this stage in China's development, investment is the key driver, said Damien Ma, an analyst at Eurasia Group, a global political-risk research organization.
“China can finally push away from the export model, which it has wanted to do for a long time,” he said. “China does not want to be the factory of the world forever.” READ MORE
