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ReturnChina:When China＇s trade surplus hits a new high
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admin
PublishDate：
2006-07-17 16:39:00
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349
Massive foreign trade surplus is one major topic of discussion in China's economic landscape for the first half of the year. The country's total import and export value approached nearly 800 billion US dollars with a trade surplus of 61.4 billion US dollars in the first half year, a record of almost 55 percent over the same period of last year.
The momentum for high growth of China's exports has been maintained for the past five years. The trade surplus retained a relatively big scale in the first six months this year since it had topped the 100 billion US dollar mark last year.
The big trade surplus volume aggravated trade disputes, adding pressure on RMB appreciation and also bringing an unfavorable impact on domestic economic operation and macroeconomic-control efforts.
With its big imports and exports, however, China's foreign trade has been basically balanced since the country's WTO accession in late 2001. The sharp increase in the surplus is ascribed mainly to the robust demand overseas and industrial transfer globally. In the meantime, raw material price hikes on the world market restrained the import spur.
The strong export and weak import were further underpinned by the fixed asset investment frenzy coupled with a consumption slump in the new round of economic growth. The manufacturing sector, in particular, relies heavily on export to unload its excessive capacity. But that further weakened import incentives.
In addition, the tight supply in some bottleneck sectors has been alleviated, which also weakened and reduced the demand for import.
Obviously, it is the intrinsic economic structural problem, rather than export incentive policies or protectionism, that are to blame for the massive surplus. Experience of the developed economies has proved that the structural adjustment cannot be achieved overnight and trade imbalance is hard to avoid in this process. To date, Japan and Germany are still having huge trade surpluses .
Trade imbalance or trade conflicts should deserve much attention so as to get it balanced. But the surplus only makes up a too small proportion in China's total foreign trade to arouse any over sensitive backlash.
As a matter of fact, changes have already taken place in China's foreign trade mix. The growth pace of export slowed a noticeable downward trend while that of import sped up. The slight appreciation of the Chinese currency Renminbi yuan since July last year has moderated the export rise by 3 percentage points and boosted import growth by about 0.5 percentage points over the period from the second half of 2005 till now. The gap between the import increase and the export growth narrowed to 4 percentage points from 20 percentage points at the same period of last year.
China's foreign trade has entered into a period of readjustment this year, and trade scenario is changing in a subtle way. Trade surplus could tend to be smaller in the second half of the year if the upward momentum of import sustains.
Will much stronger yuan cure the trade ailment? Experts doubt that. The reform on RMB exchange rate system to improve the exchange rate forming mechanism is not specially designed to solve the problem of trade imbalance, but to make the foreign economic and financial sector more market-oriented so as to facilitate China's participation into the globalization process.
Bitter lessons from appreciating Japanese yen still reminds people of the terrible economic consequences arising from an unilateral action of local currency revaluation aimed to balance the trade.
It is not likely to avoid or eliminate China's trade surplus in a short period of time. The most efficient solution for uprooting the trade imbalance is precisely to change the way the foreign trade grows, optimize the export mix, build up brands and improve the non-price competitiveness.
Policies should also be modified to encourage imports. Only balanced trade can make sustainable foreign trade growth and stable macro-economy.
The momentum for high growth of China's exports has been maintained for the past five years. The trade surplus retained a relatively big scale in the first six months this year since it had topped the 100 billion US dollar mark last year.
The big trade surplus volume aggravated trade disputes, adding pressure on RMB appreciation and also bringing an unfavorable impact on domestic economic operation and macroeconomic-control efforts.
With its big imports and exports, however, China's foreign trade has been basically balanced since the country's WTO accession in late 2001. The sharp increase in the surplus is ascribed mainly to the robust demand overseas and industrial transfer globally. In the meantime, raw material price hikes on the world market restrained the import spur.
The strong export and weak import were further underpinned by the fixed asset investment frenzy coupled with a consumption slump in the new round of economic growth. The manufacturing sector, in particular, relies heavily on export to unload its excessive capacity. But that further weakened import incentives.
In addition, the tight supply in some bottleneck sectors has been alleviated, which also weakened and reduced the demand for import.
Obviously, it is the intrinsic economic structural problem, rather than export incentive policies or protectionism, that are to blame for the massive surplus. Experience of the developed economies has proved that the structural adjustment cannot be achieved overnight and trade imbalance is hard to avoid in this process. To date, Japan and Germany are still having huge trade surpluses .
Trade imbalance or trade conflicts should deserve much attention so as to get it balanced. But the surplus only makes up a too small proportion in China's total foreign trade to arouse any over sensitive backlash.
As a matter of fact, changes have already taken place in China's foreign trade mix. The growth pace of export slowed a noticeable downward trend while that of import sped up. The slight appreciation of the Chinese currency Renminbi yuan since July last year has moderated the export rise by 3 percentage points and boosted import growth by about 0.5 percentage points over the period from the second half of 2005 till now. The gap between the import increase and the export growth narrowed to 4 percentage points from 20 percentage points at the same period of last year.
China's foreign trade has entered into a period of readjustment this year, and trade scenario is changing in a subtle way. Trade surplus could tend to be smaller in the second half of the year if the upward momentum of import sustains.
Will much stronger yuan cure the trade ailment? Experts doubt that. The reform on RMB exchange rate system to improve the exchange rate forming mechanism is not specially designed to solve the problem of trade imbalance, but to make the foreign economic and financial sector more market-oriented so as to facilitate China's participation into the globalization process.
Bitter lessons from appreciating Japanese yen still reminds people of the terrible economic consequences arising from an unilateral action of local currency revaluation aimed to balance the trade.
It is not likely to avoid or eliminate China's trade surplus in a short period of time. The most efficient solution for uprooting the trade imbalance is precisely to change the way the foreign trade grows, optimize the export mix, build up brands and improve the non-price competitiveness.
Policies should also be modified to encourage imports. Only balanced trade can make sustainable foreign trade growth and stable macro-economy.
