Though spokesman of the National Bureau of Statistics said at a press release on July 20 that China’s trade surplus will continue, some experts say the country is likely to see a rough balance in import and export in the second half of this year.

According to Chinese customs, China’s export and import value totaled US$645.03 billion in the first half of this year, up 23.2% year on year, in which export and import respectively grew 32.7% and 14% year on year to hit US$342.34 billion and US$302.69 billion, leaving a trade surplus of US$39.63 billion, exceeding the US$31.98 billion surplus for the whole of last year.

The gap between the export and import growth rates was a reflection of the fall in domestic investment brought about by macroeconomic control, which resulted in less import of capital goods such as machinery and mineral ores, said Li Yushi, a senior researcher with the International Trade and Economic Cooperation Research Institute of the Ministry of Commerce.

China’s imports in the past were mostly capital goods like machinery and mineral ores, and the import volume of consumer goods was small. And it is thus natural to import less capital goods owing to the macro economic control, he said, adding that similarly, high export growth also reflected inadequate domestic demand.

This view was echoed by Zhang Feng, a senior economist with the State Information Center, who said that import and export under general trade was the main reason for the high export growth and the decline in import growth in the first half of this year.

In the first five months, China’s fixed asset investment in urban areas increased 26.4% year on year, with the growth rate down 8.4 percentage points from the same period of last year.

The growth rate of China’s imports under general trade, meanwhile, plunged 32.9 percentage points in the same period.

The experts say that the second half of this year will see a basic balance between export and import growth rate.

Li Yushi predicts that the export growth rate will drop to about 20% in the second half year, due to adjustment of the export tax rebate policies, while the import growth rate will move up on expected recovery of domestic investment demand.

Meanwhile, big trade surplus in the first half of this year has caused experts to worry about negative effects.

Enormous trade surplus may trigger trade frictions and add pressures on revaluation of the domestic currency.

Trade surplus also shows that China’s economic growth is mainly pulled up by external demand, said Song Guoqing, a professor of the Beijing University Economic Research Center, pointing out that excessively high dependence on foreign trade may greaten the potential risks of the Chinese economy.

Zhang Feng said external demand at least contributed three percentage points to Chinas 9.4% GDP growth in 2004, even considering the price factor.

All the experts agree that China should strive to expand its domestic demand, which is now comparatively weak.

They say domestic consumption, instead of external demand, should be in a leading position in a country’s economy, at least accounting for 70% of its GDP.

Chinese economy’s dependence on foreign trade was 51% in 2002, 60% in 2003 and 70% in 2004. This trend is very dangerous, the experts note, as once external demand decreases, the national economy will be substantially influenced. (Asia Pulse Pte, Limited)