China registered a record trade surplus in January as imports plunged on falling commodity prices and weak domestic demand.

Imports fell by the most in more than five years, declining 19.9 percent from a year earlier, the customs administration in Beijing said Sunday. That compared with estimates for a 3.2 percent drop in a Bloomberg survey of analysts. Exports slid 3.3 percent, leaving a trade surplus of $60 billion.

A property downturn and a stall in manufacturing are signals the government may need to step up measures to stimulate the economy, as domestic demand for commodities including crude oil and iron ore declines. The record trade surplus, combined with declines in exports and imports, complicates the government’s management of exchange rates after January’s currency depreciation.

“It seems that sharp decline in commodity prices, weak domestic demand and weak external demand, reflected in processing imports, all played a role in the decline in imports,” Wang Tao, chief China economist at UBS Group AG in Hong Kong, said. “Trade data again creates a dilemma for the exchange rate. A record trade surplus is supposed to add appreciation pressure, but declining exports would say otherwise.”

It’s not in China’s interest to let the yuan depreciate sharply, according to Liu Ligang and Zhou Hao at Australia & New Zealand Banking Group Ltd.

‘Slew of Instruments’

“China’s central bank will continue to use a slew of instruments, including fixing rates, open market operations, and direct interventions, to prevent the RMB from weakening sharply,” they wrote in a note.

Value of crude oil imports fell 41.8 percent from a year earlier, iron ore imports dropped 50.3 percent and coal plummeted 61.8 percent. Quantities of the commodities declined as well. Imports declined from all major trade partners, including the European Union and the U.S.

Falling prices have cut the dollar value of imports and contributed to a prolonged decline in factory gate prices, which may extend to a record 35 months, according to economist estimates.

“The slump in imports means a slump in the overall situation of the economy,” Hu Yifan, chief economist at Haitong International Securities Group Ltd., said yesterday in Hong Kong. “We are going to see more of these alarming data in the next few months.”

China’s central bank announced a cut to banks’ reserve ratio requirements Feb. 4 to offset liquidity outflows and bolster lending.

‘Further Stimulus’

The slumping exports “underscore concerns about fading competitiveness and weak external demand,” Bloomberg economist Tom Orlik wrote in a note. Exports trailed the median estimate of a 5.9 percent increase.

The export and import figures, both alarming, “reinforce the case for further moves toward stimulus,” Orlik wrote, as he expects one more benchmark interest rate cut in the first quarter.

The surprisingly weak data need to be interpreted with caution, he wrote, as the seasonal effect of Chinese New Year, an artificially high base last year and falling prices may exaggerate the weakness.

Exports to the European Union, Hong Kong and Japan fell 4.4 percent, 10.9 percent and 20.4 percent respectively. Shipments to Russia plunged 42.1 percent.

The decline in exports to Hong Kong may be partially attributed to the government’s crackdown on fake invoicing, used by companies to avoid limits on bringing foreign currency onshore, according to Orlik and Haitong’s Hu.