China first-quarter growth to fall below 7% as exports decline unexpectedly

China's exports declined unexpectedly in March, casting doubts on the country's ability to attain its targeted growth rate of 7% in the first quarter.

Exports fell by 14.6% in March, reversing from a 48.9% growth in the previous month, according to official data.

By geography, shipment to the US, EU and Japan fell by 8.0%, 19.1% and 24.8% in March respectively, down from a positive growth of 48.5%, 44.1% and 23.6% in the prior month.

The sharp decline in exports is widely attributed to a front-loading effect before the Chinese New Year. Nevertheless, the overall China's trade growth has been sluggish during the month.

Imports continued to decline in March, falling by 12.3%, compared to a 20.1% fall in the prior month, indicating that the domestic demand remains soft. In addition, the drop in commodity prices has dragged the import value.

Trade surplus for March plummeted to $3.1bn (£2.1bn, €2.9bn) from $60.6bn in February.

For the first quarter, China's trade dropped 5.9% year over year, down from 3.9% in the fourth quarter of 2014.

Given the weak trade figures, the government is expected ease policies and launch measures including a tax rebate for traders.

"The extremely weak import growth suggests that China's Q1 GDP growth could have fallen to below 7.0%," said economists at ANZ bank, who forecast China's economy to grow 6.9% in the first quarter.

The country is scheduled to release its first-quarter economic growth figures on 15 April.

"We believe that the RMB is likely to remain steady leading to the IMF's Special Drawing Rights (SDR) Review in May, as the May meeting will assess whether the RMB is suitable to be added to the existing SDR currency basket consisting of the dollar, the euro, the pound, and the yen," they added.

"However, the weak trade data could add some uncertainty to the RMB exchange rate in the short term. We continue to see increasing volatility in RMB exchange rate in the foreseeable future."