3rd LD-Writethru-China Focus: Exports surge, but dipping imports highlight weak domestic demand

China's trade rebounded in February from the previous month's surprise contraction, but imports were subdued in another sign of continued weakness in the world's second-largest economy.

Exports surged 48.9 percent in February from a year earlier, reversing the 3.2-percent decline in January. However, imports plunged by 20.1 percent, accelerating from the previous month's 19.7-percent fall, according to data from the General Administration of Customs (GAC).

The value of February exports amounted to 1.04 trillion yuan (169.11 billion U.S. dollars) while the value of imports was 666.1 billion yuan, resulting in a widening trade surplus of 370.5 billion yuan.

China's demand for raw materials such as iron ore and coal shrank as economic growth slid last year to its lowest level since 1990.

The country has been striving to lessen its reliance on investment and foreign trade by fostering growth driven by domestic demand.

The Chinese government lowered its growth target to 7 percent for 2015, below the 7.5-percent goal that was narrowly missed last year. It also cut its annual target of increasing foreign trade to around 6 percent for this year, from the 7.5-percent goal set for 2014.

On Saturday, Commerce Minister Gao Hucheng said February's foreign trade would be weak but he expressed confidence that China would meet the trade target this year.

The GAC figures showed China's exports and imports fell 2 percent year on year in the first two months, compared with a 3.8-percent increase registered during the same period of last year.

It is common for the Chinese economy to start the year sluggishly due to the Lunar New Year holiday, when many businesses and factories shut down for a week-long holiday, which fell in February this year but January in 2014.

Chinese companies followed their tradition of rushing to export before the holiday, which along with a carry-over effect from last year, caused the fluctuations in exports, GAC spokesman Zhang Guangzhi said.

After discounting the seasonal factors, total trade volume declined 7.2 percent during the January-February period, with exports up 1.2 percent and imports down 17.3 percent, the GAC said.

Analysts said imports have been weaker than exports, highlighting the need to spur domestic demand.

China's imports from major trade partners all fell, which, besides seasonal factors, was mainly caused by lower commodity prices and slackening domestic demand, said Zhang Liqun, researcher with the Development Research Center of the State Council, a government think tank.

As external demand looks uncertain this year, domestic demand remains the main engine to drive economic growth, said HSBC Chief China Economist Qu Hongbin. "We expect the government to take more easing policies to support growth."

The central bank has cut the benchmark interest rates twice since November and lowered banks' reserve requirement ratio in Feb. amid concerns about deflationary risks as growth slows.

To shore up growth, the Chinese government plans to raise the fiscal deficit target for 2015 to 1.62 trillion yuan. That would be 2.3 percent of GDP, and up from the targeted 1.35 trillion yuan (2.1 percent of GDP) in 2014.

Mei Xingbao, a member of the National Committee of the Chinese People's Political Consultative Conference, China's top political advisory body, said the "Belt and Road" Asian trade infrastructure initiatives will play an important role in boosting foreign trade and stabilizing growth by strengthening manufacturing exports.

"Belt and Road" refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives proposed by China in 2013 for improved cooperation with countries in Asia, Europe and Africa.

A 40 billion-U.S. dollar Silk Road Fund was created in February to offer investment and financing services to economies and private players along the route. Endi