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Foreign Trade to See Slower Growth This Year
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China's Ministry of Commerce has projected a 15-percent growth for foreign trade in 2007, down nine percent from last year.


The figure means that the country's total imports and exports would break the US$2 trillion mark this year.


China, the world's third largest trader after the United States and Germany, registered US$1.76 trillion in foreign trade and an aggregate trade surplus of US$177.47 billion last year.


The ministry has predicted a slower growth in both trade and surplus this year in its 2006 Autumn Foreign Trade Report, without giving specific projections.


Liu Wei, President of the Economic Institute of the Peking University said that China's foreign trade would continue to report a surplus for the foreseeable future unless there was a sudden consumption boom at home.


"A drastic decline in exports would damage job opportunities and jeopardize social stability," he said.


Justin Yifu Lin, director with the China Center for Economic Research of Peking University, contended that the country's surplus had been exaggerated.


"Foreign trade has been viewed by some companies as a convenient channel to transfer overseas hot capital into China to take advantage of the appreciating Renminbi yuan," Lin said.


He explained that the malpractice normally involved three parties: local processing firms, their foreign trade partners and overseas investors. The three sides would clinch under-the-table deals requiring local processing firms to purposely understate the prices for raw material imports and exaggerate the export prices for finished products.


"By doing so, local processing firms would pay less and earn more foreign currency. The invisible inflow of foreign exchange would then be retained in China to bet on Renminbi appreciation," he said.


"This kind of falsification may continue until market speculation on the appreciating yuan begins to fade," Lin said.


(Xinhua News Agency January 21, 2007)


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