Editorials

Shrinking trade surplus

(China Daily)
Updated: 2010-10-14 07:57

With so many talks of currency wars in the air, Chinese policymakers must be content that the country's trade surplus stopped surging last month.

The latest statistics show that China's monthly trade surplus narrowed to $16.88 billion in September, its lowest level in five months.

Chinese policymakers may well hope that such a shrinking trade surplus, down 15.7 percent over the previous month, will help ease international pressure on China to move faster on currency revaluation.

Huge as it is, the trade surplus itself indicates that the country's dependence on external demand for growth has already declined. Because of both the record import growth and the fast expansion of the national economy, net export is set to contribute a smaller share of China's gross domestic product growth this year.

However, with some debt-laden rich countries eager to cut their trade and fiscal deficits, it is unlikely that they will read the trade numbers the same way as Chinese policymakers.

The September trade figure also means that China has just posted the largest quarterly trade surplus - $65.6 billion - since the worst global financial crisis in more than half a century broke out in late 2008.

As the world's largest exporter and the fastest-growing major economy, China is not in deliberate pursuit of excess trade surplus, nor is it reluctant to boost domestic consumption into a robust growth engine for its own economy as well as the world's.

It is unwise to selectively read too much into the country's short-term trade numbers, be they monthly or quarterly, while missing important changes that may reshape the trade prospects at home and abroad.

One such defining change is the steady expansion of China's imports, which hit a record high of $128.11 billion last month. This is a clear sign that China's domestic consumption is rising and becoming a stronger source of global demand to support the sustained recovery of many other economies.

Another remarkable thing is how well the trade sector has so far survived the European debt crisis. Even though that crisis has made Chinese goods more expensive to import into euro-zone countries, China's trade with the European Union has expanded 34.4 percent so far this year. Fresh evidence that those who irresponsibly blame China for its currency policy might be overstating the importance of exchange rates in international trade.

The recent rise of the yuan against the US dollar has yet to show its impact on the bilateral trade between China and the United States. But it surely makes no sense to take the ongoing gradual shift of China's trade structure, engineered as a part of the change of the country's growth pattern, merely as the effect of an exchange rate adjustment.

(China Daily 10/14/2010 page8)