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China set to balance trade amid soaring surplus

(Xinhua)
Updated: 2007-03-17 14:39

Government efforts have paid off and, according to figures produced by the National Bureau of Statistics, highertariffs and other complementary measures have successfully cut China's exports of coal by almost 12 percent and crude oil by over 21 percent in 2006.

Despite the good omen, industry officials state that reducing the structural trade surplus is hard to realise in short time. China's trade surplus will continue for a long time, and the reduction of the structural surplus has a long way to go.

"The situation will probably remain largely unchanged over the next decade," said Yi Xianrong, a renowned economist with the Chinese Academy of Social Sciences.

Indeed, according to Joseph E. Stiglitz -- a Nobel Prize Laureate inEconomics, "China should improve social welfare to lower its high savings, a strategy that would help base the already export-fueled economy more on domestic consumption."

Stiglitz went on to add that, although China's high rate of savings is envied by the rest of the world, it is not all that good for the economy.

High rates of saving means that China is dependent on exports to keep its economy growing, he said, adding that, "One of the reasons that people save so much is that they are worried about their future."

In recent years, Chinese residents' savings ratio has remained above 40 per cent, much higher than the average savings ratio of 20 per cent in economically more developed countries.

According to Stiglitz, in order to increase consumption and reduce saving, China should improve its retirement program, health and education.