China Seeks to Shrink Trade Surplus

China’s trade surplus will shrink over the coming months as the government adopts more stimulus measures to boost imports, said the Commerce Ministry Tuesday.

China’s trade surplus for July surged unexpectedly to an 18-month high of $28.7 billion as exports grew 38.1% year on year to a record high of $145.5 billion. Growth in imports, however, fell to 22.7 percent, from 34.1 percent in June.

“Given that growth in exports outpaces that of imports, as shown by the July trade figures, the Chinese government is planning to adopt measures during the rest of the year to boost demand for imports and balance foreign trade,” said ministry spokesperson Yao Jian at a press briefing.

The slower growth in imports is seen as a sign that China’s curbs on the real estate sector are hurting demand. Yao rejected economists’ predictions that the trade surplus will remain high as import growth continues to decelerate. The trade surplus will narrow as stimulus measures take effect and household incomes increase, he insisted, without specifying details on government measures.

China’s export growth has fallen in the three months since May. The ministry expects the export growth rate to continue falling for the rest of the year.

“Government policies to reduce tax rebates on energy-intensive exports in June and the recent policy on remitting import value-added tax and import tax on some high-tech products will help narrow China’s trade surplus in the short term,” said Li Jian, a researcher at the Commerce Ministry’s Academy of International Trade and Economic Cooperation.

The ministry will hold the China 2010 Import Forum in September as part of its efforts to stimulate imports. Other import-oriented policies include reduction of overall tariffs to 9.8%, further reductions for raw materials, zero-tariff treatment for less developed countries, and more credit facilities for imports.

Analysts said the measures to stimulate imports will help ease pressure on the high trade surplus in the short term, but cannot be perceived as a long-term strategy.

“The high trade surplus is a result of the export-oriented economic development mode”, said Song Hong, an economist with the international trade department under the Chinese Academy of Social Sciences. “In the long run the high trade surplus would gradually narrow when the household incomes increase and the Chinese economy becomes more consumer-driven.”

Analysts expect monthly trade surpluses to stay above $20 billion for the rest of the year. They also expect the government’s ongoing real estate tightening to curb imports of raw materials and equipment.

BEIJING (Xinhua)