1、1Chinas Trade Surplus Not-Due to Global Economic ImbalanceCHINAS sustained trade surplushas produced concern in many,quarters recently and has trig-gered calls from some countries,notably the U.S.,pressing China to re-valueits currency and to rein in policiessupportive of its domestic industries.How
2、ever,analysis shows that Chinastrade surplus,which has kept increasingfor about 20 years,is the result of Chinasreform and opening-up drive and of intro-ducing preferential policies to attract in-vestment: It has little to do with the RMBexchange rate. Evolving Towards BasicallyBalanced Trade Chinas
3、 trade surplus started gettingnoticeable in the 1ate 1990s and acceler-ated rapidly in the 21st century,reachinga peak before the international financialcrisis began to impact on trade in 2oo8.As Figure z shows,after 2008 the tradesurplus fell somewhat,and the gap nar-rowed further in 2010. Chinas t
4、rade surplus in 2010 was US$183.1 billion,a year-2on-year drop of 6.61percent,and the second successive annualfall.The narrowing of the margin wasmainly caused by Chinas dynamic do-mestic economy as the effects of Chinasimport expansion strategy have becomemore apparent.With the lifting of pro-eessi
5、ng trade restrictions,which had beenimposed to curb exports,imporfs of pro-eessing trade-related bulk raw materialsincreased correspondingly. In 2010,Chinas trade surplus ac-counted for 3.1 percent of its GDP.Someexperts have predicted that the proportionwill drop to 1 percent in 2011.We remem-ber v
6、ividly that in his letter to the G20summit last year,Timothy Geithner,U.S.Treasury Secretary,called upon membercountries to formulate quantitative tar-gets to.improve the current account im-balance and to bring down the proportionof the current account surplus/deficit toGDP to under 4 percent by 201
7、5.WhetherChina supports this idea or otherwise,judging from the present situation,thedrastic decrease in the percentage shareof Chinas trade surplus in its overall GDPwill become a trend,indicating a basicallybalanced development trend in Chinasforeign trade. Chinas import and export trade datafor 2
8、010 indicate that the growth mode ofChinas foreign trade is being transformedand upgraded.In 2010,while process-ing trade maintained steady 3growth inimports and exports,there was a rapidincrease in general trade imports andexports,replacing processing to accountfor half of the total trade volume.In
9、terms of export structure,in 2010 Chinastraditional bulk commodity exportsmaintained good growth momentum andexports of electromechanical productswith high added-value increased by 30.9percent,accounting for about 6o percentof the gross export value. In the first six months of 2010,thetotal value of
10、 Chinas general trade wasUS $679.49 billion,a leap of 46.5 percent,an increase of 3.4 percentage points overthat for overall trade for the same period;the deficit in general trade was US $37.09 billion,in contrast to a surplus in generaltrade of US $6.35 billion in the first sixmonths of 2009,which
11、indicated thatChinas foreign trade strategy of adjustingthe structure,and improving the balancehad achieved a positive result.Since July15,2010,China has cancelled tax rebateson 406 tariff items including partial typesof steel and non-ferrous metal process-ing materials,demonstrating the centralgove
12、rnments determination to adjust theexport structure. In addition,the proportion of Chinastrade surplus to the 4total trade sum de-creased from 11.6 percent in 2oo8 to 8.9percent in 2009,and it dropped evenfurther to 6.2 percent in 2010.It is pre-dicted that the proportion will continue todecline in
13、2011,with Chinas foreign tradebecoming more balanced. As regards the type of commodities,primary products are in deficit on thewhole,and manufactured goods are insurplus in general.Of the primary prod-ucts,food products,live animals for fooduse,beverages,and tobacco productshave a trade surplus,and
14、the rest have atrade deficit.Of the manufactured goods,miscellaneous manufactures,machin-ery and transport equipment,textileproducts,rubber products and miningproducts have a trade surplus.In terms ofindustrial classification,the vast majorityof the trade surplus has been created bycommunications eq
15、uipment,computerand other electronic equipment manu-facturing,textile and garment,footwearmanufacturing,textiles,leather and furproducts sectors. In 2010,clothing,shoes,and luggageproducts accounted,as they have tradi-tionally done,for an important proportionof all export products.Aside from this,th
16、e export value of high-teeh productsreached US $492.4 billion,representing31 percent of 5total exports and display-ing the clear effect of favorable policiesintroduced by the Chinese government inrecent years. Huge Impact of FDI on ExportGrowth and Trade Surplus Chinas trade surplus stems fromeconom
17、ic globalization and transferredindustrial links,not global economicimbalance. Chinas surplus owes its existence tospecific structural conditions.Process-ing trade is the principal form of foreigninvestment in China.In the late 1900sthe surplus in processing trade beganto rapidly overtake that of th
18、e generaltrade surplus,and processing trade basessupported mainly by foreign-funded en-terprises were gradually formed acrossthe country (see Figure 2).Nowadays,the international division of labor hasdeveloped from product specialization toa chain operation that limits the variousdistributed modes o
19、f production for asingle product across different countriesand regions,This will inevitably gener-ate trade between the countries involvedin the produet,s intermediate stages.Theprincipal beneficiaries of Chinas tradesurplus are transnational corporationsengaged in processing trade in China,forexamp
20、le in electronic goods.Fully 80 per- cent of 6Chinas 2010 trade surplus withthe U.S.in 2010 was generated by suchtransnational corporations.These enter-prises form an Asian production network,and not only profit hugely from laborand environmental cost advantages,butalso export immense numbers of fin
21、ishedproducts to European and American mar-kets.Thus a trade surplus manifests be-tween China and these trading partners. In addition,the proportion of the sur-plus generated by foreign enterprises toChinas total trade surplus is now greaterthan the share generated by enterprisesin other forms of ow
22、nership (see Figure3)- This situation also has to do with theintermediate-product division of labor ininternational products,and is in line withthe flow direction of international directinvestment.Employing various forms ofinvestment,transnational corporationsallocate different links of the producti
23、onchain for a particular product to differentcountries and regions.China,with its ad-vantages of abundant cheap labor,prefer-ential investment policies,stable politicalenvironment and relatively sound legalenvironment,has attracted huge foreigninvestment,and the growth trend of for-eign investment w
24、ill be maintained forsome while. In the globalizafion process China hasbecome an important link in internationalindustrial transfer,and an 7importantdestination for transferred manufactur-ing enterprises.Those foreign enterprisesimport raw materials,productionequipment and key componentsinto China,s
25、hift the processingand production elements thereand then export the final prod-ucts to their target markets.FromChinas import and export flowdirections,it can be seen that aglobal industrial labor divisionpattern has come into being,inwhich East Asia is the componentsupplier,China is the process-ing
26、 and manufacturing base,and the U.S.and Europe are thekey technology developers and ma-jor markets. Changes in international divi-sion of labor have led to a stablesituation of Chinas trade balancewith other countries.China importsa large number of raw materialsand semi-finished products fromEast As
27、ian countries and regions.After processing and assembly,the finished products are exportedto the American and Europeanmarkets.This situation has led to atransformation of the original pic-ture in which East Asian countrieshad a trade surplus with the U.S.and the E.U.into one in which the surplusis C
28、hinas.Therefore,the China-U.S.andChina-Europe trade surplus has increaseddramatically.According to figures fromChina Customs,the China-U.S.trade sur-plus reached US $181.3 billion 8in 2010,and that with the E.U.topped US $142.7billion.Meanwhile,Chinas trade deficitwith Japan,ROK,ASEAN and Taiwan to-
29、taled U.S $227.6 billion. Measures Adopted toExpand Imports The year 2011 is the first year ofChinas 12th Five-year Plan for NationalEconomic and Social Development,and foreign trade policies will emphasizetransforming trade modes,adjustingtrade structure,and promoting coordina-tion,with the focus o
30、n promoting basicbalance and steady growth of trade.How-ever,there are still many uncertainties in Chinas trade environment,with favorableand unfavorable factors coexisting.Favor-able factors for export include improve-ment of Chinese enterprises internationalcompetitiveness,the gradual recoveryof t
31、he global economy,and the possiblegrowth of market demand after long beingsuppressed because of the financial crisis.Unfavorable factors for export includeweak growth in household consump-tion caused by high unemployment ratesin the developed countries,aggravatedprotectionism and uncertain impact of
32、appreciation of the RMB on the strneturaladjustment of trade.For the foreseeablefuture,China 9will maintain the stabilityof its support policies for the processingtrade,and will put emphasis on encour-aging foreign-funded enterprises to es-tablish headquarters and R&D centers inChina,so as to accele
33、rate the formation ofdomestic industrial chains. The import expansion concept,ges-tating since 2007,has now become anational strategy.This year,China willadopt eight measures to encourage ira-ports and promote balanced trade.One,in accordance with the requirements ofits industrial policies,China wil
34、l activelyimport resources,advanced technologiesand key equipment.Two,China will prop:erly cope with trade frictions and disputesand encourage imports from the maincountries having trade deficit with China.Three,China will further optimize theimport tariff structure,and guide enter-prises to expand
35、imports.Four,China willcontinue to promote convenience in trade and reduce import fees and .costs. Five,China will constantly improve the public information service sys- tem for import,and improve trans- parency of polieieh.Six,China will sponsor various types of imported goods exhibitions,fairs,pre
36、senta- tions,etc.,to enhance international-economic and trade cooperation and 10exchanges.Seven,China will ac- tively employ a variety of financial, taxation and other means to support expansion of imports.Eight,China will continue to organize missions abroad to promote trade and invest- ment activi
37、ties. In terms of implementation of pblieies,three aspects are involved: import tariffs on luxury consumer goods will be reduced,regulations will be relaxed on subsidized loans for import enterprises,as will the import quota system.Of these three aspects,reduction of import tariffs on luxury consume
38、r goods would meet little resistance,as a most ef- fective measure to expand domestic commercial service.The subsidizedloans policy will mainly target large-sized mechanical and electricalproducts and high-teeh goods,aiming toreduce the impor cost.It is possible theimport quota system will target bulk corn-modifies such as cotton for those enter-prises engaged in the processing trade.
