The governor of the People's Bank of China, Zhou Xiaochuan, expects the country to face more disputes with trading partners in the near future in view of its growing trade surplus. Speaking to Caijing magazine, Zhou said that this year exports would play a major part in the country's economic growth, but contribution from investment and consumption is expected to moderate.
Zhou defended China against criticisms that a devalued Renmimbi is a key contributor to current global financial imbalances, and thus requires further appreciation. 'In the major global economies, the influence of domestic consumption on the trade balance is far greater than that of foreign exchange rate adjustments. This is the situation in Japan as well as the US', he said.
China has been locked in a number of trade disputes this year, especially with the US and the EU over its textile sector. The US government accepted an industry request to consider quotas on another 13 types of textile imports from China. Zhou stressed the need to stimulate domestic demand to offset the big trade surplus and reduce trade frictions. China's trade surplus for the first eight months of the year stood at $60.22 billion. Last year, China recorded a trade surplus of $32 billion, which prompted the US to renew its demand for removing its currency peg.
Meanwhile China's Commerce Ministry expects a trade surplus in the region of $90-100 billion for 2005, and the country's total trade is likely to be touch $1.4 trillion. Reuters reported, quoting the International Business Daily, that the ministry's foreign trade department projects exports to increase 30% y/y in 2005 to $750 billion, while imports are projected to increase by about 18% y/y to $660 billion.
Exports recorded strong growth more than offsetting the rebound in imports. The significant trade surplus will put pressure on China to further increase the value of the Yuan. Exports have continued to boom, despite a 2.1% revaluation of the Yuan, along with the imposition of textile quotas by the US and EU.