BEIJING -
Despite measures taken by the government to attain
more balanced trade, China's trade surplus
continued to soar in the first half of this year,
adding pressure not only on China but on its trade
partners to adjust their economies.
The
trade surplus soared to US$112.5 billion, up 84%
from a year earlier, according to statistics
released on Tuesday by the General Administration
of Customs. China's trade surplus in June hit a
new high of $26.91 million, up 85.5% over the same
month of
last
year.
Although the remarkable growth was
largely attributed to the fact that many Chinese
exporters rushed to sell abroad as much as
possible before lowered export-tax rebate rates
took effect in this month, it is expected to
deepen the tension between China and some of its
major trade partners.
Liang Hong, an
economist with Goldman Sachs Asia Economics
Research Group, said this level of trade surplus
is unprecedented for China or any other major
economy in the world. Liang expects the trade
surplus to account for about 8% of gross domestic
product (GDP) in the first half of 2007, up from
6.3% during the same period last year.
Refusing to speed up revaluation of the
yuan, Beijing has adopted a number of methods,
such as levying export taxes and cutting export
tax rebates, to reduce the widening trade surplus.
In a further move, the government has scrapped
rules that forced exporters to bring home foreign
currency they earn. The State Administration of
Foreign Exchange (SAFE) said that effective from
July 1, it had withdrawn the rules - drafted in
the late 1990s - that required exporters to
exchange all their foreign-currency earnings with
banks in a stipulated period.
Preferential
treatment was given to exporters with good records
in converting their foreign exchange and
punishment for those that did not. The currency
regulator said in a statement on its website that
the rules played a big role in improving the
management of foreign-exchange settlement; but the
changed economic situation necessitates a policy
change.
In the wake of the 1997-98 Asian
financial turmoil, a large amount of money flowed
out of China, leading to a severe shortage of
foreign exchange. So the government introduced a
series of measures to ensure enterprises settle
their foreign exchange with banks, said Mei Xinyu,
a researcher with the Chinese Academy of
International Trade and Economic Cooperation
attached to the Ministry of Commerce.
"Those measures guaranteed macroeconomic
stability," he told China Daily. Now, the country
has $1.2 trillion in foreign-exchange reserves,
which are "having an adverse impact on China's
macroeconomic stability", Mei said.
More
yuan must be channeled into the market to negate
the effect of increasing reserves, which has led
to excess liquidity and pushed up asset prices.
Meanwhile, speculative money has been flowing into
the country in anticipation of profits as the yuan
is rising.
The yuan hit a new high against
the US dollar on Tuesday, according to the Chinese
Foreign Exchange Trading System. The value of the
yuan went up 240 basis points from Monday's 7.6085
against the dollar to open for trade on Tuesday at
7.5845, the highest rate since the yuan was
revalued by 2.1% from 8.28 in July 2005.
It is the 49th time that the yuan's value
has hit a record this year, climbing by 2,242
basis points from 7.8087 on the last trading day
of 2006.
"The authorities can shift their
focus to warding off the influx of hot money," Mei
said, adding that it is important for the country
to move from a mandatory foreign-exchange
settlement regime to a more relaxed system where
individuals and enterprises can opt to keep their
foreign currencies.
But the United States
and the European Union also need to adjust their
domestic economies to help rebalance global trade,
said Mei: "In this era of globalization, China's
big trade surplus and trade deficits of developed
countries, in particular the US, are actually the
two sides of the same global economic imbalance."
Mei said China's fast-growing exports are
driven in part by the demand of developed
countries, and it requires not only China's
efforts but those of developed countries to
achieve a new balance.
"If the US fails to
address its 'low savings, high consumption'
problem at home, it will be hard for China and
other Asian countries to absorb the trade
surplus," he said.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
