Moving up industrial value chain

For China to gain a competitive edge for the future, it must successfully restructure and upgrade to high-end industries.

Although China witnessed a record trade surplus in May, according to statistics from the General Administration of Customs, pressures remain on foreign trade growth.

The trade surplus in May was $35.92 billion, an increase of 74.9 percent on a year earlier, with exports increasing by 7 percent year-on-year to $195.47 billion, and imports decreasing by 1.6 percent year-on-year to $159.55 billion. It was the highest single month surplus in five years.

However, it is still too early to hail the expanded trade surplus as a positive sign for China's foreign trade prospects. An analysis of China's foreign trade data in the previous four months of this year and for the whole of 2013 will show that the country's trade surplus was only 215.4 billion yuan ($34.58 billion) from January to April, a decrease of 42.9 percent from the same period last year. Thus, the export rebound in May has only to some extent checked the tendency of China's tumbling foreign trade, given that the country's exports in the previous five months declined by 0.4 percent year-on-year, 13.9 percentage points down from the same period of the previous year.

At the same time, the increased trade surplus in May was also a result of the decrease in imports that month. The same statistics indicate that in May, the value of China's imports decreased by 1.6 percent year-on-year, 2.5 percentage points down from the growth in April. From January to May, the country's imports increased by only 0.8 percent year-on-year, a decline of 7.4 percentage points from the same period last year. Therefore, the sharp increase in the country's May trade surplus as a result of its dwindling import demand is more like a "recessionary trade surplus".

In a general sense, a recessionary trade surplus comes after a country's external demand deteriorates and both its exports and imports shrink, but imports decease at a faster rate, this usually occurs during a global economic slump or recession.