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China’s trade data for the month of February turned out weaker than anticipated, underlining a further loss of momentum in the world’s second largest economy and stirring concerns about a trade recession, despite a series of support measures.

Customs data released on Friday showed dollar-denominated exports dropped 20.7 percent last month from the prior year, ending much lower than the expected 4.8 percent fall and marking as the biggest slump since February 2016. The latest figure followed a 9.1 percent increase registered in January.

Imports stumbled 5.2 percent from a year ago, also below analysts’ average estimate of a 1.4 percent decline and extending from January’s 1.5 percent loss. Imports of major commodities were down across the board.

Chief Economist Raymond Yeung said today’s figures reinforced their view that China’s trade recession has started to emerge.

Trade balance faltered in February at $4.12 billion which significantly missed forecast of $26.38 billion. The country posted a trade balance of $39.16 billion in January.

China’s politically sensitive trade surplus with the US contracted sharply to $14.72 billion in the prior month from January’s $27.3 billion.

Trade War, Several Headwinds

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While seasonal factors may have been at play, the surprisingly disappointing results from the country further raised fears about a global slowdown; a day after the European Central Bank (ECB) cut its growth outlook for the region.

Analysts have cautioned about an impending loss of pace in Chinese exports even though overall economic data out of China has been strong for the last year.

The increasingly staggering data comes amid months of intense discussions between the US and China aimed at ending their trade conflict.     

The country continues to talk through the trade dispute with the US, its major trading partner. Exports remained robust for most of 2018, driven by exporters rushing to ship their products to avoid tougher tariffs.

Sources familiar with the trade negotiations stated that the two countries seem to be near reaching the conclusion of discussions that could end later this month.

Analysts also warned that figures from China at the start of the year might be distorted due to business disruptions caused by the week-long Lunar New Year holidays, which began in early February this year but came in mid-February in 2018.

Still, the negative data did not came as a shock for several China spectators as they had anticipated a weak start in 2019 as factory surveys showed waning domestic and export orders and the US-China trade war dragged on.

Investors have also been expecting slowdown both worldwide and in China, according to Director and Client Portfolio Manager Sarah Lien.

There are a lot of headwinds; there is a lot of moving parts in market, Lien said.

Analysts at a US investment bank stated that export momentum on a three-month basis has moderated enormously since the third quarter of 2018 and said growth is likely to remain soft in the near future.

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