Experts divided over future of China's trade surplus

10:36, August 23, 2010      

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China's trade surplus in July stood at 28.7 billion U.S. dollars, setting an unexpected new high since February 2009. The surging trade surplus raised market expectations for the second half of 2010, while the Ministry of Commerce predicted that the trade surplus would continue along a downward trend.

Due to strong exports in July, China's trade surplus from January to July was 83.9 billion U.S. dollars, 21.2 percent lower year on year. However, the decrease rate was 21.3 percentage points lower than that of the first six months this year.

Market analysts pointed out that the record high level of exports was only one reason for the soaring surplus. They believe that falling growth of imports was a much more important reason, which indicates that China's domestic demand is sliding.

Yao Jian, spokesman of the Ministry of Commerce, holds that domestic demand would not contract and the trade surplus would continue to decline.

Earlier this year, he predicted that China's trade surplus for 2010 will be around 100 billion U.S. dollars.

The government's exit from stimulus policies and stable bulk commodity prices on the global market will slow down China's import growth in the second half, while the economic growth in both developed countries and emerging economies will help to keep China's exports from rapidly decreasing, said Qing Wang, Morgan Stanley's China economist.

The widening trade surplus inevitably raises expectations for the appreciation of yuan. Mark Williams, an expert on the Chinese economy from Capital Economics, said that yuan exchange rate will remain a key problem as long as China's trade surplus remains high.

By Qi Shuwen, People's Daily Online


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