Economy

　　Trade Deficit

　　China reported a large trade deficit in February mainly due to distortion related to the Chinese New Year holidays， marking the first deficit since April 2013.

　　Last month， the trade deficit stood at $22.98 billion， compared with a surplus of $14.8 billion last February and $31.86 billion this January， the General Administration of Customs (GAC) said in a statement.

　　Total trade dropped by 4.8 percent year on year to $251.18 billion， with exports dropping 18.1 percent and imports up 10.1 percent， according to the statement.

　　In January， foreign trade climbed 10.3 percent， with exports rising 10.6 percent and imports up by 10 percent， previous data showed.

　　“The Spring Festival holiday (January 31 to February 6) factor contributed to large fluctuations in trade volume and the deficit last month，” the GAC said.

　　Chinese companies followed their tradition of rushing to export before the holiday and prioritizing imports after it， the GAC added.

　　The dramatic fluctuation in the monthly trade figure has caused some concerns about the health of the trade sector.

　　However， GAC spokesman Zheng Yuesheng played down the fluctuation， saying that trade growth will likely return to normal after the holiday distortion goes away in March.

　　Moderate Inflation

　　China’s consumer price index (CPI)， a main gauge of inflation， increased 2 percent year on year in February， marking easing inflationary pressure since the end of last year， official data showed.

　　The growth rate was down from 2.5 percent in the previous month and appeared to be at its lowest level since February 2013， according to figures released by the National Bureau of Statistics (NBS) on March 9.

　　The slowed CPI increase， in line with market expectations， was mainly attributed to the mild growth of food prices， which account for nearly one third of the weighting in the calculation of China’s CPI.

　　Analysts predicted mild inflation would be sustained for several months amid economic downward pressure and weak global commodity prices.

　　Inflation has slowed in pace for four straight months in China， as the country’s economic growth decelerated amid industrial restructuring and furthering reform.

　　The producer price index (PPI)， which measures inflation at the wholesale level， contracted 2 percent year on year in February after a 1.6-percent decline in January， said the NBS.

　　China’s PPI has been in deflationary territory for 24 consecutive months， the longest-lasting drop since the 1990s， according to the bureau.

　　Private Banks

　　China will set up five private banks on a trial basis before the practice is extended to more areas， the chief of the country’s banking regulator said on March 11.

　　The first batch of five banks will be in Tianjin， Shanghai， as well as Zhejiang and Guangdong provinces， according to Shang Fulin， Chairman of the China Banking Regulatory Commission (CBRC).

　　Ten private companies， including Internet firms Alibaba and Tencent， have been selected to take part in the preparation work for setting up the banks， Shang noted， adding that their eligibility as shareholders will be subject to further examination.

　　Each of the banks will be co-sponsored by at least two private capital providers， Shang said.

　　Shang did not provide a timetable for the launch of the banks， saying that they will be approved when “conditions are ripe.”

　　Setting up private banks in China was written into an ambitious reform package rolled out after the Third Plenary Session of the 18th Communist Party of China Central Committee in November 2013， representing further opening up of the country’s banking sector.

　　Compared with existing commercial banks， private banks will be subject to the same regulation and supervision， according to the CBRC chief.

　　But financial services of private banks will be oriented toward small and micro businesses as well as residential communities， Shang explained.

　　Risk monitoring will be strengthened and shareholders’ behaviors will be regulated， Shang added.

　　Strong Combination

　　Chinese Internet firm Tencent plans to buy a 15-percent stake in JD.com， a major online direct sales company in China， before the latter launches its initial public offering (IPO) in the United States.

　　The purchase， representing 251，678，637 outstanding JD ordinary shares， will cost Tencent $214.6 million and its e-commerce branches， according to Tencent’s statement filed with Hong Kong Stock Exchange on March 10.

　　After the purchase， Tencent will continue to buy 5 percent of JD’s outstanding ordinary shares on a post-IPO basis， the statement said.

　　In return， JD will take over Tencent’s business-to-consumer and consumer-to-consumer platforms Wanggou.com and Paipai.com， with all capital， assets， liabilities transferred to JD. It will also gain a minor stake in Tencent’s other online shopping website Yixun.com and the right to buy the site’s remaining shares.

　　The deal， dubbed the two companies’ overall business collaboration in the e-commerce business， aims to win leverage in the competition with another Chinese e-commerce firm Alibaba， which owns and operates the country’s largest online purchase platform.

　　In addition， Tencent will offer JD level-1 access points at WeChat and Mobile QQ， two of the most popular mobile messaging apps developed by Tencent， to boost the latter’s growth in physical goods e-commerce， the statement said.

　　The two firms will also further ties in mobile apps and online payment solutions， with JD being regarded as Tencent’s preferred partner in certain business areas.

　　Offshore RMB Index

　　China’s most internationalized bank， Bank of China (BOC)， rolled out its first offshore renminbi index (ORI) on March 11， in a move to push globalization of the currency.

　　The bank’s ORI mainly tracks development of the yuan’s deposit scale， operation， use of financial tools and other aspects with five indicators reflecting performance in the international financial market.

　　BOC rolled out a cross-border renminbi index (CRI) last year. The two indexes combined offer a comprehensive tracking system for the yuan’s internationalization progress， said Chen Siqing， President of BOC.

　　The ORI increased from 0.32 percent at the end of 2011 to 0.91 percent at the end of 2013， indicating the growing scale of offshore renminbi deposits.

　　The index showed that Hong Kong is the leading offshore renminbi center while the markets in Africa， Middle East and America offer great potential.

　　Compared with other major international currencies， the yuan enjoys a limited share in the global offshore market， but is accelerating its internationalization using Southeast Asia as a springboard.

　　FTA Talks

　　Australian Prime Minister Tony Abbott announced on March 10 that during his visit to China early next month， he will discuss the proposed free trade agreement (FTA) between China and Australia with Chinese leaders.

　　When delivering the annual government work report to the National People’s Congress in Beijing on March 5， Chinese Premier Li Keqiang said that China will accelerate negotiations for an FTA with Australia.

　　Australian Trade Minister Andrew Robb said that Li’s comments were “most encouraging and highly welcomed.”

　　“The world is acutely aware of the opportunities presented by China. So we need to do all we can to lock in our trading assessment relationship if we are to protect and grow our access to China in the years and the decades ahead，” Robb said.

　　A deal with China， Australia’s biggest trading partner， is believed to be a boon for the Australia’s agricultural exports， such as beef and dairy.

　　The FTA is also expected to open the lucrative Chinese market to Australia’s financial services， legal services， education and telecommunications， Robb said.

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