China's excessive trade surplus is detrimental to both domestic economic development and foreign trade relations, Minister of Commerce Bo Xilai said in Beijing on Monday.

He said that reducing trade surplus was the "top priority" of the year's foreign trade development.

China's Commerce Minister Bo Xilai is surrounded by journalists after a press conference in Beijing in this April 11, 2006 photo. With China's surplus reaching US$177.47 billion in 2006, Bo said on Monday, January 15, 2007 in Beijing that trade surplus has developed into a "prominent" problem. [Reuters]

"Enterprises and trade authorities at various levels should be fully aware of the significance of surplus reduction," he said.

"This is an opportunity for China to upgrade its lower value-added processing trade, optimize export structure and urge companies to shoulder their social responsibilities."

Customs figures show the surplus reached US$177.47 billion in 2006, with foreign trade totaling US$1.76 trillion, US$338.78 billion more than in 2005, up 23.8 percent year-on-year.

As China's economic growth was mainly powered by exports, Bo said the government would keep a close eye upon the negative impact of surplus reduction on national economic growth, especially job losses.

"To minimize the bad impact, effective measures must be taken to expand domestic consumption," he said.

China has used a package of industrial and taxation policies to rein in exports of energy-consuming products and to simultaneously facilitate imports of advanced equipment and technology.

Last year, exports rose 27.2 percent from the previous year to US$969.08 billion, while imports were up 20 percent to US$791.61 billion. The export growth was 1.2 percentage points down from 2005 while that of imports were 2.4 percentage points up.

The December surplus stood at US$21 billion, still the third monthly highest of the year despite a slight decline from November's US$22.9 billion.

Bo said the expanding trade surplus had evolved into a "prominent" problem.

"The yawning surplus against the United States and the European Union has strained China's foreign trade environment, triggering more frequent trade friction," he said.

The European Union and the United States are China's top two trading partners, both with a trade volume with China of more than 200 billion U.S. dollars.

The Ministry of Commerce said 25 countries and regions launched 86 anti-dumping and trade protection investigations against China last year, up 37 percent, affecting a combined trade volume of US$2.05 billion.

FDI in China tops US$63 billion in 2006

Foreign direct investment (FDI) used in China in 2006 topped US$63 billion, up 5 percent over the previous year, Bo said.
 
Bo said China would make effective use of foreign funds and make the service sector a key area to attract foreign investment.

Although China has been the largest recipient of foreign investment among all developing nations for 15 years, there is much to be done to improve both of its quality and quantity, Vice Premier Wu Yi has said.
China is to channel more foreign investment into research and development centers, new high-tech industries, advanced manufacturing, and the energy conservation and environmentally friendly sectors.

At the same time, investment that helps upgrade China's agriculture and traditionally manufacture is also encouraged.

While receiving large amounts of FDI, Chinese companies have been actively investing overseas, said Bo.

The overseas investment of Chinese multinationals totaled US$16.1 billion last year, up 32 percent year-on-year.