China faces first trade deficit in 17 years with calmness

China recently announced a trade deficit of 8.4 billion yuan for the first quarter of this year, the first quarterly unfavorable balance of trade registered by the country in 17 years.

In simple terms, economists explain that a country with a favorable balance of trade is lending money for others, while one with an unfavorable balance of trade is borrowing money.

he situation in China has thus thrown the ordinary Chinese people, who place their future in bank savings, into anxiety.

However, Chinese government officials, and economic and trade experts exhibit calmness, and even coolness in face of the trade deficit.

Despite the trade deficit in the first quarter, China expects to reach trade balance as a whole for the year, said Fu Ziying, assistant to the Chinese Minister of Commerce, and at most would have only a small amount of trade imbalance.

At the ongoing 95th China Export Commodity Fair held in Guangzhou, capital of south China's Guangdong Province, Fu stressed repeatedly that China gives priority to improving export products and mix by developing a growing number of big-name enterprises and name-brand products for export, in a bid to build itself to be a strong trader in the world.

The export commodity fair, a biannual event in spring and autumn, is dubbed the "weatherglass" of the country's foreign trade, as it accounts for one-third of the country's exports conducted through general trade. Business deals worth 20.49 billion US dollars were struck at the 94th China Export Commodity Fair.

Dr. Ma Xiaye, president of the Shanghai Academy for World Watch,said that traditionally, a favorable balance of trade is encouraging and desirable as it means money-earning, while an unfavorable balance of trade is also advisable as it means using borrowed money for the nation's economic development.

Ma quoted as an example that the long-term trade deficit of the United States helps the country keep up its economic development with the support of capital from worldwide.

It is recognized in economic circles that a trade deficit is a grave situation for countries with lower foreign currency reserves and poor balance of payments.

But China could not be put into the category, said Ma, citing that China was ranked fourth place in the world in its 851.2 billion US dollars of foreign trade in 2003, and the second in its439.8 billion dollars of foreign currency reserves by the end of March 2004.

A trade deficit of 8.4 billion dollars is a trifle in the context of the total imports and exports of 239.8 billion dollars conducted by China during the first quarter of this year, Ma noted.

Ma, who was in the first group of Chinese observers of the General Agreement on Tariffs and Trade, replaced by the World Trade Organization (WTO) in 1994, has been engaged in research on China's foreign trade for years.

Though foreign trade volume in China maintains rapid growth, trade quality and mix are still far from satisfying the country's expectations, Ma pointed out.

The trade deficit in the first quarter proves that China's efforts in restructuring its trade system are paying off, said Ma.

With respect to the trade deficit in general, it does not necessarily mean that individual provinces and regions in the China deal with more imports than exports, said Ma.

Thus, Ma called for local governments to center more efforts onincreasing quality trade and restructuring their trade systems, and to give rational evaluation on trade status instead of drawing conclusions based only on analyses of figures.

Huang Jingbo, dean of the International Business Department of Lingnan College, Zhongshan University in Guangzhou, said that limited-volume trade deficit is a stimulant for the growth of any economy which is maintaining stable expansion.

Given the same level of trade deficit registered for the whole of the year in China, its influence upon the country's vast economy would be negligible, Huang said.

Chen Lei, vice director of the Guangdong provincial WTO Research Center, said that the rise in imports at a faster pace isthe reason behind the trade deficit, instead of export difficulties.

China's exports kept growing in the first quarter of the year as well, Chen added.

Chen attributed the trade deficit to China's readjustment of tax rebate on exports, lowered import taxes, increasing domestic demand for energy and raw materials.

Chen said that there is little probability for a widening trade gap in the year, as the impact of the factors leading to import rise will be abating gradually in the months to come.

A high favorable balance of trade has put China at a disadvantage in international trade talks, said Chen.

During recent years, China saw a declining favorable balance oftrade, Chen said, adding that the deficit during the first quarterof this year mainly occurred during the trade with neighboring countries and regions, like Japan, and ASEAN nations.

To some extent, the trade deficit is instrumental for China in improving its trade ties with neighboring countries, said Chen.

Since China launched the opening-up and reform in 1978, foreign trade volume in the country has kept growing year-by-year, with favorable balance of trade reported in the majority with the exception of the trade deficit during the 1984-1986 period.

The fair in Guangzhou is held in two stages, with manufactured goods on show at the first stage that ends Tuesday, and souvenirs and gifts and commodities for daily use at the second stage from April 25-30.

Source: Xinhua