Chinese Trade Surplus to grow by USD 250 billion next year

Last updated on: May 31, 2007 at 8:11 pm by Desh Kapoor

Chinese Trade Surplus to grow by USD 250 billion next year 2007-05-31T20:11:45-05:00 Desh Kapoor

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The growth of China in the past years is phenomenal. But growing the trade surplus at a rate of $200 billion a year is amazing!! This story also brings out the close nexus between the Govt and the Business (which I suspect is just an extended arm of Chinese Government itself!). Chinese Businesses are successful on the back of some highly subsidized regime. It is good for a while.. but it is not sustainable for long.

China’s trade surplus will reach $250-300 billion in 2007, driven by the country’s price competitiveness and strong external demand, the top economic planner said on Tuesday.

China’s surplus hit a record $177.5 billion in 2006. In the first four months of this year the surplus totaled $63.3 billion, up 88 percent from a year earlier.

"The trade surplus is unlikely to shrink in the short term, and it may last for a long time during the industrialization process," the National Development and Reform Commission said in a statement on its Web site (www.ndrc.gov.cn).

Beijing has cut export tax rebates and raised export taxes for high-polluting and energy-intensive products in an effort to trim the trade surplus.

However, it has maintained a gradual pace of currency appreciation despite international pressure to let the yuan rise faster. Foreign economists argue that the yuan is seriously undervalued, giving Chinese goods an unfair competitive edge.

The commission said that neither a stronger yuan nor cuts in export tax rebates would result in a large shift of export orders away from China, as the world’s fourth-largest economy now enjoyed pricing power in the global market.

"It’s hard for importing nations to find replacements for (Chinese) manufacturers. It will be impossible in the foreseeable future to shift orders away (from China) on a large scale," it said.

That means Chinese producers can transfer most of their increased costs to importers: the yuan rose about 3.25 percent last year, while Chinese export prices went up 4.2 percent, the agency said.

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