Shrinking surplus, rising imports amid growth pattern transformation

BEIJING - China will probably post a trade deficit in March after reporting a surprise deficit in February, as its efforts to stimulate imports take off, Commerce Minister Chen Deming said on Sunday.

Economists also said the country's shrinking trade surplus and rising imports will help tighten capital liquidity, curb inflation and reduce pressures on yuan appreciation.

In February, China witnessed a trade deficit worth $7.3 billion, the first such deficit since last March.

"China will further expand imports this year. Besides February, China will likely see a trade deficit in March," said Chen, who did not elaborate on the figures, at the 12th China Development Forum in Beijing,.

With imports expected to pick up, the "ratio of China's trade surplus to its GDP this year will probably drop to less than last year's 3.1 percent", he said.

China has become the second-largest importer worldwide, following the United States. The nation initiated moves to boost imports late last year as a way to balance trade and help transform its economic development mode to one that is more domestic consumption-oriented.

In 2010, China's imports grew by 38.7 percent, 7.4 percentage points higher than exports, and China's imports from the US, European Union and Japan grew by 32.6, 30.2 and 36.6 percent from a year earlier.

"China will enhance imports especially from the least developed nations and the nations and regions which run trade surpluses with China," Chen said.

As China's consumption of high-end and luxury goods abroad has grown very rapidly in recent years, the nation is also considering "encouraging Chinese people to purchase high-end goods in China" by making imports cheaper and more convenient.

The possible measures include "fostering Chinese high-end brands, building up stronger logistics and sales networks, and launching policies that allow made-in-China luxury goods to be directly sold in China".

At a press briefing during the recent two sessions of the National People's Congress and Chinese People's Political Consultative Conference, Chen said that the country will expand imports of green, high-tech and natural resources goods worldwide this year, simplify procedures and cut tariffs on some imported items.

Last Thursday, the Ministry of Commerce together with seven other ministries and administrations launched guidelines on promoting the imports of mechanic and electronic goods, including those in the new energy, energy-saving and high-end equipment manufacturing sectors, in the next five years.

"Of course, China will be importing more. But what must be pointed out is the US should lift some of its controls (of high-tech goods to China)," said Nobel Prize laureate Joseph E. Stiglitz on the sidelines of the forum.

Foreign exchange rate adjustments that make imported goods cheaper could also stimulate imports, but "the most important factor is increasing income of households", he said.

China's surplus has been on the decline since the global financial crisis. In 2010, it fell by 6.4 percent year-on-year to $183.1 billion, after the 34-percent fall in 2009. But the US and a number of other economies have repeatedly demanded that China allow its currency to rise rapidly.

China's foreign exchange reform will be made at a "controllable and gradual" pace, Chen said at the forum.

"A possible deficit in March means China's trade surplus will decrease sharply this year. This is really good news," said Zhang Xiaoji, senior researcher with the Development Research Center of the State Council.

"Pressures on yuan appreciation will reduce, so will the nation's pressures on tightening capital liquidity and curbing inflation as the foreign exchange reserve drops," he said.

China will record deficits in the first half of the year and surplus for 2011 will shrink, said many economists citing rising commodity prices worldwide and the faster growth of imports than exports.

In the next five to 10 years, the size of China's overseas direct investment (ODI) will "equal" that of foreign direct investment (FDI) on the Chinese mainland, and China expects Chinese companies to be treated equally and fairly overseas, Chen said.

China's ODI grew to $59 billion in 2010, six times of that in 2003, and the FDI was $105.7 billion last year.

The three-day forum is annually held in Beijing.

China Daily