China expects $150b trade surplus

BEIJING—China’s trade surplus should soar to a record $150 billion this year, nearly 50 percent above the 2005 level, according to Commerce Ministry figures reported Friday by a state news agency.
The figures were the government’s highest projection yet for the mounting trade gap, which has fueled strains with Washington and other trading partners. The Commerce Ministry said exports this year are expected to total $960 billion this year, with imports rising to $810 billion, the official Xinhua News Agency said.
That would produce a deficit of $150 billion, up from $102 billion in 2005. The government said Wednesday that China’s monthly trade surplus hit a record monthly high of $23.8 billion in October. It was the fifth new monthly record this year. Both exports and imports are growing by double-digit rates, but import growth has slowed amid government efforts to cool off an investment boom that Chinese leaders worry could ignite a financial crisis.
Authorities have raised interest rates twice this year and curbed building of new factories and other projects. Those controls might be cutting into imports by discouraging purchases of foreign-made factory equipment and other capital goods. The Commerce Ministry earlier forecast a trade surplus of at least $140 billion this year. The government has let its currency, the yuan, rise by about 3 percent against the U.S. dollar over the past 16 months.
That should help close the gap by making Chinese exports cost more, while imports are more attractive to Chinese consumers. The export-driven flood of money pouring into the country is forcing China’s central bank to buy up billions of dollars a month in order to reduce pressure for inflation to rise.
That has driven the country’s foreign exchange reserves to over $980 billion - the largest in the world - and they are expected soon to top $1 trillion. In Germany on Friday, the governor of the People’s Bank of China said China has no plans to change its policies toward foreign exchange reserves. Speaking on the sidelines of a conference in Frankfurt hosted by the European Central Bank, Zhou Xiaochuan said, “We stick to the existing policy.”
The European Union trade commissioner, Peter Mandelson, visited Beijing this week and called on the Chinese government to live up to its status as a major exporter by further easing barriers to foreign competition in its markets. But Commerce Minister Bo Xilai rebuffed Mandelson’s appeal, saying China was a developing country with hundreds of millions of poor people and a fragile financial system that couldn’t afford to make drastic changes.

—Daily Mail, People’s Daily news exchange item