China unexpectedly swung to a February trade deficit of $7.3 billion, compared to January's trade surplus of $6.5 billion.
China's largest trade deficit in seven years was caused by a surge of imports, while export growth was low.
The unexpected trade deficit, along with rising oil prices caused by concerns over unrest in North Africa and the Middle East, led to a fall in Chinese stock prices.
The SSE Composite Index of Chinese stocks fell 43.99 points, or 1.47%, to 2,958.16, while the Hang Seng Index of stocks traded on the Hong Kong stock exchange fell 195.22 points, or 0.82%, to 23,614.89.
Although the markets didn't take news of the surprise trade deficit well, it may not be such bad news for the Chinese economy.
The surge of imports is a sign that Chinese economic growth is being fueled not just by exports but also by internal demand, which would lead to more manageable and balanced growth for China.
Also, China has long been accused of keeping its currency artificially low in order to give the country's exporters an unfair trade advantage. The February trade deficit may help to ease tensions with governments like that of the United States that have called on China to let the Chinese yuan appreciate in order to reduce trade imbalances.
A rising yuan would also make imports cheaper and aid in the governments efforts to increase domestic consumption. The reduced inflow of foreign cash into the Chinese economy would help to ease inflationary pressures that the Chinese government has been trying to deal with.
Investors who would like to profit from the rise in imports into China should take a look at the Global X China Consumer ETF
Investors who want to invest in a company that may profit directly from increased domestic consumption might want to consider Acorn International
Another stock to consider is China Nepstar Chain Drugstore Ltd.
Investors who view China's February trade deficit in a negative light should consider the ProShares Short FTSE China 25
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