01/12/2006, 00.00
CHINA
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2005 record year for China trade

The trade surplus tripled, reaching more than 100 billion US dollars. The data, released yesterday, will fuel calls for a revaluation of the yuan. But government economic bodies exclude this option to maintain high economic growth.

Beijing (AsiaNews/SCMP) – In 2005, China had a record trade surplus of

101.9 billion US dollars, more than triple the 2004 figure. The increase is sure to cause concern among western partners who will renew pressure for a revaluation of the yuan.

The General Administration of Customs yesterday reported that in 2005, exports totalled 762 billion dollars (+28.4%) while imports amounted to 660.12 billion (+17.6%). This makes China the third largest trading power in the world, after the United States and Japan, with annual growth of more than 20% for four years now.

The surplus comes from domestic overproduction – this has drawn benefits from large investments by Chinese and foreign firms and from public macroeconomic policy aimed at reining in the growth rate – which generated enormous quantities of merchandise which were pushed into the world market. China's biggest trading partner is the European Union, with trade of 217.31 billion dollars (+ 22.6%), followed by the US, with 211.63 billion (+ 24.8%), and Japan with 184.45 billion (+9.9%).

This increase will give new impetus to calls for a revaluation of the yuan. Many economists, especially in Washington, hold that the Chinese currency is kept artificially low and that this contributes to making its products more competitive on the market, in comparison with other countries. "The persistent large trade surplus suggests the reserve accumulation is now increasingly driven by fundamental factors, pointing to a generally undervalued yuan," said Wang Qing of Bank of America.

Beijing has always insisted that the fixed rate of exchange of the yuan is only one of the factors which make its merchandise competitive, and that it needs to export large quantities to compensate for the cost of oil, iron and other raw materials, to rein in unemployment and to encourage direct investments of overseas firms. Another reason is that profits will eventually decrease as a result of increased competition among Chinese and foreign enterprises, according to Yao Jingyuan, chief economist of the National Bureau of Statistics.

Long Guoqiang , deputy director of foreign trade at the State Council's Development and Research Centre, said: " Probably China's trade surplus will be even bigger than last year's." However, all government planning bodies predict that economic growth will slow down to between 8.5 and 9% as a result of the notable growth achieved in recent years and "government efforts to restructure the economy", said Yang Yiyong, deputy director of the economic research institute of the State Council's National Development and Reform Commission. An increase of 1% in the consumer price index is foreseen this year, with "slight deflation in the second half of the year". For this reason, continued Yang, the government should maintain stable monetary and fiscal policies.

China is now the world's top producer of computers, mobile phones and steel. Hi-tech export reached 218.25 billion, equal to 28% of total export. Despite an economic growth rate of more than 10%, in 2005 crude oil imports only increased by 3.3% with 126.82 million tonnes, less than predicted. Steel imports, another material which has gone up in price, dropped by 11.9% with 25.82 million tonnes.

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