BEIJING – The Chinese
currency, the yuan, hit a new high against the US
dollar on Monday, after China reported its foreign
exchange reserve exceeded US$1.53 trillion by the
end of 2007 after reaping a huge trade surplus.
The yuan smashed the 7.26 mark to reach a
central parity rate of 7.2566 yuan to one US
dollar in Monday morning trading, up 106 basis
points from Friday, the previous trading day. This
was the fifth time that the Chinese currency hit a
new high against the US dollar since the beginning
of this year.
The yuan rose 6.9% against
the dollar last year and has
appreciated against the
greenback by more than 12% since a new currency
regime was imposed in July 2005 to discontinue the
local currency's peg to the dollar.
Observers said the yuan's rise would help
China reduce its trade surplus, mop up excess
liquidity and curb inflation.
China's
trade surplus surged soared 47.7% to a record
$262.2 billion in the whole year of 2007 despite a
slowdown in export growth late last year and the
negative impact of the US sub-mortgage crisis
overshadowing the world economy, the General
Administration of Customs said at the weekend.
The growth rate slowed down noticeably in
the fourth quarter of last year. The trade surplus
growth was 69.4% for the first three quarters of
2007 and nearly 75% in 2006. The country's trade
surplus for 2006 stood at $177.47 billion. Trade
surplus last month was $22.69 billion, down 14.2%
from November.
Total trade in 2007 hit a
new high of $2.17 trillion, up 23.5% from a year
earlier, according to the Customs.
The
Customs said that in the fourth quarter imports
picked up pace while exports slowed. In 2007,
China’s exports rose 25.7% to $1.22 trillion, and
imports climbed 20.8% to $955.8 billion.
"This indicated that the expanding trade
gap was effectively checked as the government's
policy adjustments began to pay off," it said in
its annual report.
Analysts believed the
slowdown in exports was attributed to slackening
demand outside China due to factors such as the US
economic decline, the combination of a weakening
greenback and strengthening yuan, government cuts
to export rebates to curb exports.
China
has been striving to adjust the trade mix by
improving policies concerning export tax rebates,
tariffs and processing trade and by restricting
exports of high-energy consuming products.
A China Customs Statistics report said the
country's foreign trade demonstrated a downward
trend in October. While citing the role of
government policies and the week off during the
National Day holiday, it pointed out the impact of
the US sub-mortgage crisis should not be
overlooked.
"The overhang of the US
sub-mortgage crisis could be a key negative factor
in China's trade sector in 2008, if the impact of
the mortgage crisis went further to affect US
consumption and employment," Zhuang Jian, an Asian
Development Bank senior economist, told Xinhua.
He said the country's surplus growth would
further slow to about 10% in theory, if export
growth continues to fall against a faster pace
with import growth.
"However, the final
outcome would depend on a wide range of factors,
including the mortgage crisis impact and the
performance of the US economy in 2008."
United Nations (UN) and World Bank reports
released on Wednesday singled out possible export
losses for exporting countries due to the US
economic decline.
The United States
remained China's second-largest trading partner,
with the bilateral trade volume standing at
$302.08 billion last year, up 15% compared with
2006, according to the customs administration.
Some US critics said the Chinese currency
was severely undervalued and gave Chinese
exporters an unfair advantage. This had resulted
in the massive trade imbalance between the two
countries.
"Voices asking for trade
protection efforts against China could get
stronger this year," said Mei Xinyu, an analyst
with a research institute under the Ministry of
Commerce. "It is a US presidential election year
and we should get prepared for escalating disputes
in trade concerning subsidies, intellectual
property rights and financial services."
In 2007, the European Union was still
China's largest trading partner and Japan its
third-largest. Trade with the EU rose 27%
year-on-year to $356.15 billion, while Japan
reached $236.02 billion, up 13.9%.
A
commerce ministry official forecast the country's
trade would expand by about 15% this year, down
from 23.5% in 2007, to exceed $2.4 trillion.
China's soaring trade surplus is the major
factor contributing to the forex reserve boom. The
foreign exchange reserve had reached $1.53
trillion by the end of 2007, up 43.3% from 2006,
the People's Bank of China (PBoC) announced on
Friday.
A total of $461.9 billion was
added to the country's forex reserve in 2007, said
the central bank. In December alone, the forex
reserve rose by $31.3 billion.
China's
forex reserve maintained a sharp growth in 2007,
reaching $1.2 trillion by the end of March, $1.33
trillion by the end of June, and $1.43 trillion by
the end of September.
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