Fears of a Hard Landing

China is routinely accused of exporting too much. Its foreign sales far exceed its foreign purchases. This chronic surplus angers many.

But this month brought two intriguing breaks to the routine. In March three of China's biggest trading partners ─ Japan, the EU and America ─ complained that China was exporting too little. They brought a case at the WTO alleging that China was unfairly restricting its exports of molybdenum and 17 "rare earths" used in the manufacture of many high-tech goods.

The other novelty arrived when China's customs bureau reported a Chinese trade deficit. At $315 billion in February, the imbalance was bigger than any deficit on record — it was bigger even than many of China's monthly surpluses.

The deficit has fuelled one fear and one hope. The fear is that China's economy will slow sharply, hobbled by declining exports to crisis-racked Europe and a rising bill for commodities. The hope is that China is rebalancing, moving away from an economic model reliant on foreign demand.

It is true that China's weak exports are contributing to a slowdown in the broader economy. China's industrial production grew by 11.4% in January and February, compared with 2010, much slower than its normal pace of about 15%. But the prospects for global growth are brightening, suggesting that China's exports have bottomed out. And the slowdown in China's economy has been matched by a helpful fall in inflation. That gives China's government some scope to stimulate demand.

The Economist, March 2012