While friction between China and the United States continues over their large trade imbalance, the World Trade Organization (WTO) addressed the gap in its first review of China's trade policy since the nation joined the global body at the end of 2001.

According to the WTO, China's surplus with the United States and the European Union is a structural issue and partially reflects Asia's current trade composition.

A report is due to be published officially in April but was released by the WTO Secretariat on Friday.

The Chinese mainland's trade surplus with both the United States and the European Union has been pushed up as a result of production and exports by Taiwanese, South Korean and Japanese investors.

Taiwan enjoyed a trade surplus of US$58 billion with the Chinese mainland last year, topping all economies in the world including South Korea, which posted a surplus of US$42 billion with China in the same year to become the No 2 surplus earner. Japan was in third place with US$16.5 billion, according to the report.

Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economic Co-operation, said that to some extent, China has been a scapegoat for the trade imbalance problem. He said the report gave a fair picture of China's role in global trade and for years, the sources of both China's trade surplus and deficit have become relatively stable.

China suffers from a huge deficit in trade with East Asian countries and regions and major energy and raw materials producers. Meanwhile, China has enjoyed great trade surpluses with the United States, the EU and non-oil exporters.

"As those economies shift their exports to the Chinese mainland through investment, their previous trade friction with the United States and the EU has been eased. The mainland has begun to bear the brunt of trade pressure," Mei said.

China's ballooning export trade over the past three years has caused concern among other WTO member countries over whether China's foreign trade systems and policies are in line with international trade regulations and whether China has delivered on its promises to the world upon its WTO accession, according to the report.

Song Hong, a trade expert from the Chinese Academy of Social Sciences, said the European Union and the United States are used to finding faults with China and, when trade imbalance happens, they are sceptical as to whether it is fully opening its markets or complying with WTO promises.

"But, in fact, it's a problem born of globalization," said Song.

About 60 to 80 per cent of China's export value is generated by foreign-invested enterprises. Much of the country's growing exports come from enterprises owned by cross-national companies, including many based in the United States, he said.

The trade imbalance between China and the United States is a structural problem in international, rather than bilateral, trade. He suggested that if the United States wants to find the cause of its growing trade deficit, it should check with of its major trade partners.

(China Daily 03/21/2006 page9)