China Is Preparing Steps to Trim Trade Surplus

Chinese Commerce Minister Bo Xilai said that the country was preparing a range of policies aimed at capping its huge trade surplus, but he stressed that their impact could not be seen
overnight.

Bo told reporters that China hoped to pursue relatively balanced trade, and that achieving that would be one of the aims of its macroeconomic tightening measures. "We have a lot of measures that are still being prepared, but the direction of those policies is clear: seeking balanced trade," Bo said on the sidelines of the annual session of the National People's Congress, the largely ceremonial parliament.

"Those policies will have an impact in reining in the overly large trade surplus, but you have to keep in mind that China's trade surplus is structural in nature," he said.

China's gaping surplus, which hit $177.5 billion last year, has been a source of friction between it and some of its trading partners, especially the U.S., which has persistently called on Beijing to let its currency rise more quickly in value to ease the trade imbalances.

While reiterating the official line from Beijing that it is not pursing a large surplus for the sake of it, Bo said that he thought the proportion of China's surplus in its overall trade volume, around 10%, was still "within a normal range".

He noted that other countries, including Germany and Japan, had for many years experienced a higher such ratio.

Besides trying to trim the trade surplus, China has been taking steps to keep fixed-asset investment in check, as part of a larger goal of making the economy more reliant on domestic consumption for growth.

The central bank has twice raised benchmark lending rates and increased the amount that commercial lenders have to hold in reserve five times since last April. Beijing has weighed in with orders to local governments to cut wasteful capital spending.

Ma Kai, head of the National Development and Reform Commission, the powerful economic planning agency, told reporters on the sidelines of the parliament that the government was hoping to see an easing in investment growth this year from last year's 24%.

Economists say that one important measure China needs to take to check investment and bring about structural adjustments is to allow prices for key resources, which it currently keeps a tight grip on, to become more market-orientated.

Ma said that Beijing would allow prices for one of those resources, natural gas, to go up over the long run, but he was quick to add that the government would have to take into account the impact any such move would have on the people.