China has stepped up its efforts to rein in its soaring trade surplus, amid growing anxiety that payments imbalances could further undermine confidence in the global economy, China Export-Import Bank’s president has said.
In an interview with Emerging Markets, Li Ruogu acknowledged that one of the bank’s key functions is to tackle issues “such as international payments imbalance and huge trade surplus”.
To this end, Li said the bank has adopted “a series of measures” to moderate export growth. It has beefed up support for small- and medium-sized US companies exporting to China “to help ease China’s trade surplus with the US”.
By March 2008, outstanding loans to finance imports from the US exceeded RMB 10.7 billion. The institution has also enhanced its provision of import credits, which it first introduced in 2006. Until the end of last year, the bank has “supported an aggregate of $48 billion in imports”.
His comments came as China’s trade surplus with the EU surged 23% to $34.1 billion in the first quarter of the year, surpassing the gap with the US, according to government data.
In a recent interview with Emerging Markets, Chinese central bank governor Zhou Xiaochuan said that China’s exports have remained resilient to global economic headwinds: “Up to now, the reality of a negative impact [of a US slowdown] on Chinese exports has been less than predicted.” Exports to the US from China are still growing, though at a lower rate, “but we have yet to find them declining”.
Li stressed that the bank’s primary role is to “support the development of China’s economy. “By financing exports and imports the bank strives to assist regional governments and enterprises in adjusting industrial structure,” thereby helping coordinate economic development, Li said. The bank’s total assets hit Rmb 542.2 billion at the end of 2007 making it one of the largest export credit agencies in the world.
Concern over pressures on China’s economy have risen in recent months as the country’s economic managers struggle to strike a balance between a fall in exports – which is necessary to cool an overheating economy – and surging inflation.
Chinese vice finance minister Li Yong emphasised in a speech in Madrid yesterday that China’s priority is on achieving “sound and not fast” growth.
“This is a big change in our thinking,” Li told an ADB seminar. “But we face many challenges, including the danger of economic overheating.” He cited the uncertain outlook for the US, European and Japanese economies; “huge uncertainties in the direction of capital flows,” an uncertain outlook for the US dollar, and protectionist pressures.
Li dismissed recent suggestions by former IMF chief economist Kenneth Rogoff that China faces a 50:50 chance of a significant growth recession, with GDP growth slipping below 6%, within the next two years. “If that happens, we will need to change our definition of recession,” said Lee who said he believed that growth this year could somewhat exceed the official target of 8%.
Faced with powerful upward pressure on prices, including soaring food and energy costs, Li said China is determined to meet its inflation target of 4.8% this year.