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Trade Surplus Continues to Grow
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China reported a record monthly trade surplus of US$14.5 billion in June and experts expect the trend to continue.

The country's exports reached US$81.3 billion last month, up 23.3 percent year-on-year, while imports stood at US$66.8 billion, up 18.9 percent from the previous year, according to statistics published by the Ministry of Commerce. The trade surplus continued to widen from US$13 billion in May.

The trade surplus in the first half of this year totaled US$61.5 billion, reflecting a sharp increase of 54.9 percent from a year ago.

Although China's central government vowed to keep its foreign trade balanced, some trade experts did not expect conditions to change in the near future.

"China is likely to maintain the high-volume trade surplus over a rather long course if basic policies of the countries are unchanged and even if the revaluation of the renminbi is taken into consideration," said Zhai Zhihong, a director with the statistics bureau.

He said China's trade surplus, which tripled to a record US$102 billion in 2005, may top US$100 billion again this year as overseas companies build export factories in China.

Zhai attributed the surplus to processing trade instead of to weak domestic demand, recognized by some as the major cause of the trade surplus.

The trade surplus from China's processing trade has grown in the period from 2000 to 2005.

Regarded as a global manufacturing centre, foreign investors have been drawn to China's processing plants. Nearly 90 percent of the country's trade surplus has come from processing trade since 2000, while over 70 percent of the surplus came from foreign-invested firms.

Zhai said China's trade surplus raised concern last year when it tripled in size.

In 2004 processing trade had a surplus of US$106.3 billion, but this was counteracted by the deficit in other trading forms such as general trade.

But the problem was intensified last year as the surplus topped US$142.5 billion in processing trade and US$35.4 billion in general trade.

Bi Jingquan, an official with the National Development and Reform Commission, predicted the country's trade surplus would climb as far as US$120 billion to US$130 billion this year.

The widening trade surplus has increased pressure on the Chinese government to appreciate the renminbi faster in order to curb the gap. In fact, the Chinese currency has gained 1.5 percent against the US dollar since China revalued it last July.

Statistics from the commerce ministry showed that China's imports and exports totaled US$795.7 billion in the first six months of this year, up 23.4 percent year-on-year.

(China Daily July 11, 2006)

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