China Customs announced recently that the trade surplus in May had reached US$13.004 billion, creating a new record for this year. Gross amounts were US$46.773 billion for the first five months.
In view of the current situation, it seems unlikely that China will be able to stick to its early 2006 estimates of "keeping trade surplus under US$80 billion this year".
Confronted with such huge figures and increasing pressure both domestic and international to rectify the situation, Prof Zhang Xiaoji, manager of the Foreign Economy Research Department under the Development Research Center of the State Council, said that China cannot solve the issue on its own.
According to Zhang, as the international market booms, so too China's export volumes.
He said that since the end of 2005, the Chinese government has been trying to control this export explosion. Some of the measures implemented include encouraging a moderate appreciation of the yuan, and restricting the export of resource-consuming products.
However, he stressed that international trade is not a unilateral affair. Measures taken by China alone will not change the situation.
Further, the measures implemented to date have also been to prevent huge economic fluctuations. It will be a while before the full effects of macro-adjustment and control are realized.
Zhang suggested that more reliance be placed on the market than on government intervention if the situation is to right itself.
China's trade surplus is the necessary product of the global market division. The recent trend has been for multinationals to pump investments into China, particularly in the field of high technology. This will continue for some time.
Another result, although not entirely so, is increasing pressure on China's foreign exchange reserves.
In 2005, forex reserves were US$818.9 billion. They have now surpassed US$900 billion. The increment here is much higher than the increase in trade surplus. The influence of short-term capital, therefore, cannot be ignored.
China's gaping trade surplus has been a key topic of discussion between China and the US.
But Zhang opined that the US would not impose sanctions on China because most of the products it imports, such as high-tech products, are actually made by the multinationals. And US ones at that.
(China.org.cn by Wang Ke June 30, 2006)