Wall Street Journal
January 12th, 2006
(pdf scan)China's Trade Surplus Tripled, topping $100 Billion Last Year
BEIJING -- China's trade surplus more than tripled in 2005 to surpass $100 billion, a surge that is likely to intensify protectionist sentiment in the U.S. against one of its biggest trading partners.
The surplus reached $101.9 billion, with exports rising 28% from 2004 to $762 billion and imports increasing 18% to $660 billion, China's General Administration of Customs reported on its Web site yesterday. The 2004 trade surplus was $32 billion.
Some economists say they believe China's trade surplus may narrow this year because the country's imports have begun to pick up in recent months. Beijing also is seeking to reduce trade frictions by promoting domestic consumption.
"China is gradually becoming a more positive force for global growth as its policies are adjusted towards boosting domestic demand," Goldman Sachs said in a report.
Economists point out that the overall U.S. imbalance with Asia has remained roughly unchanged over the past several decades. Many of the country's trading partners in Asia have moved production lines to China in recent years to take advantage of the country's low labor costs, resulting in "Made in China" labels on goods previously produced in their own countries. As a result, the U.S. trade deficit with much of the rest of Asia has narrowed roughly in step with the expansion of its deficit with China.
Economists attribute China's large trade surplus in 2005 in part to Beijing's efforts to discourage investment in overheated sectors of the economy, which helped spark a sharp slowdown in import growth in the first half. The cooling campaign targeted sectors including real estate, steel and aluminum production. The measures turned China into a major exporter of steel from a large net importer, economists say.
However, property development started to pick up again in the last few months of 2005, increasing imports of construction materials. Imports of electronic components and machinery also increased.
The pickup in demand was reflected in December's trade figures, with exports rising 18% from a year earlier to $75.41 billion but imports growing faster at 22%, to reach $64.4 billion, according to customs figures.
A think tank under the National Development and Reform Commission, China's top economic planning agency, suggested that the trend would continue this year. It predicted that imports would expand about 18%, while exports would increase by about 15%, according to the official Xinhua news agency.
China's two-way trade with the U.S. surged 23% to $211.63 billion last year, according to the Chinese customs service. It didn't give a breakdown for imports and exports. The European Union was China's largest trading partner, with two-way trade increasing 23% to $217.31 billion.
China is already under pressure from the U.S. and other trading partners to further revalue its currency, the yuan. Beijing revalued the yuan by 2.1% last year, but critics say the currency remains undervalued against the dollar, making China's exports unfairly cheap. The U.S. is expected to report that its trade deficit with China increased to more than $200 billion in 2005 from $162 billion in 2004.