Newly implemented tax reforms and the Spring Festival holidays may have been the driving forces behind a slowdown in export growth.
Despite foreign direct investment growth of 13.6 per cent, China reported a trade deficit in January, according to statistics from the Ministry of Commerce.
Exports rose 19.8 per cent year-on-year, marking a sharp slowdown from the December rate of 50.7 per cent.
Li Yushi, an expert from the Chinese Academy of International Trade and Economic Co-operation (CAITEC), a think-tank of the ministry, attributed the slowdown in exports to tax rebate reform and the Spring Festival.
"Exporters rushed to ship out their goods by the end of last year, in order to cut the losses created by the tax rebate reform," he said.
The rebate system took effect January 1 and cut the refund rate for exports by an average of three per cent.
The slowdown is also driven by the Chinese traditional Spring Festival, Li said.
Imports rose 15.2 per cent
The trade deficit reached US$20 million for the first time in 10 months.
The flow of foreign direct investment rose by 13.6 per cent to US$4.1 billion following a slowdown last year.
Contracted foreign investment, an indicator of future trends, rose an annual 10.4 per cent in January to US$10.2 billion.
A shrinking trade surplus or deficit in several months of this year would not be surprising.
"The country has to buy more products from abroad to feed its roaring economy," he added.
Increasing protectionist measures from the United States and other countries will also have negative impact on China's exports.
However, exports will continue to grow moderately due to strong global demand but not as fast as imports, Li said.
China's trade surplus for 2003 fell to US$25.5 billion.