China mulls cutting big surplus in trade
By Zhang Dingmin (China Daily)
Updated: 2005-11-28 05:36

China will try to boost its imports and keep the momentum in export growth in the coming months, aiming to reduce a rapidly-growing trade surplus that has drawn fire from its major trading partners.

The State Administration of Foreign Exchange (SAFE), China's foreign exchange regulator, said yesterday the nation is expected to continue to witness a "sizeable" surplus in its international payments during the second half of this year, which will push its forex reserves to higher levels.

A female worker works in a textile factory in Nantong, East China's Jiangsu Province November 26, 2005. [newsphoto]

In the first report on the nation's international balance of payments (IBP), which was released yesterday, the administration said the surplus in its current account, which covers mostly trade in commodities and services as well as current transfers such as remittances from overseas Chinese, ballooned by 801 per cent on a year-on-year basis to US$67.3 billion in the first half of this year.

The SAFE said it will publish half-year IBP reports on a regular basis from this year onwards.

The current account surplus mainly comes from commodities trade, which reported a US$54.2 billion surplus in the first half of the year, surging by 823 per cent year-on-year on the back of factors such as weak domestic demand, a stronger manufacturing industry, as well as healthy global economic growth, it said.

For the capital and financial account, the other part of a nation's international balance of payments, the surplus shrank by 43 per cent year-on-year to US$38.3 billion, driven mostly by a deficit in portfolio investments, SAFE said.

In the second half of the year, as the government strives to boost spending and accelerate the development of the capital market, the administration said the current account surplus will likely maintain its growth momentum, while the capital and financial account surplus may witness slow growth.

To balance its international payments, the nation will try to boost imports of strategically important raw materials, resources as well as advanced technologies and equipment, while reducing exports of highly-polluting and energy-consuming products, SAFE said.

It will also direct more foreign investment to central and western regions as well as to high-tech industries.

The administration expressed worries that the rapid increase in forex reserves, which rose to US$711 billion at the end of June, may have an impact on monetary policy implementation, inflation as well as the likely creation of an asset bubble.

(China Daily 11/28/2005 page2)