China's trade surplus widened to a record $177.5 billion last year, representing an increase of 74 percent from a year earlier.

Exports rose 27 percent year-on-year to $969 billion last year, while imports climbed 20 percent to $791.6 billion.

"The trade surplus is a reflection of China's increasing competitiveness," said Xie Fuzhan, head of the National Bureau of Statistics.

He said the dazzling growth of exports was also the result of booming foreign direct investment (FDI) in China. Foreign investors are drawn to the country's abundant labor resources and preferential opening-up policies.

The government has made reducing the trade surplus one of its top priorities this year. The commerce ministry said the government would encourage more imports, particularly from countries with major trade deficits with China, and continue to restrict exports of high-energy-consuming products.

Chinese economists said it would take two years or longer for China to achieve balanced trade.

As a result of the government's trade policy last year, the rate of export growth declined 1.2 percentage points compared with the year before, while the growth rate of imports grew by 2.4 percentage points.

China's foreign trade volume is forecast to increase by about 15 per cent year-on-year to $2 trillion this year, according to a report jointly released by the Chinese Academy of International Trade & Economic Cooperation and the commerce ministry.

In related development, actual FDI in China hit $63 billion last year, reflecting a slight increase of 5 percent from a year earlier, with the service sector becoming a new hotspot.

Officials from the commerce ministry predict that China will not see big increases in FDI this year, though the service sector will continue to attract funds in an effort to optimize the country's foreign-investment structure.

The government has drafted a law to unify income tax rates for domestic and foreign companies at 25 percent.

Domestic companies presently pay a 33 percent income tax, while foreign companies, which benefit from tax waivers and incentives, pay an average of 15 percent. The new regulation may take effect next year.

(China Daily 01/26/2007 page4)