Time to fine-tune strategies, boost imports

By Li Jian (China Daily) Updated: 2011-07-01 10:41

There are also some in China who argue that trade surplus is important as the net export figures is a positive trigger for gross domestic product (GDP) growth. But after the financial crisis, China's foreign trade surplus has risen sharply and so also has the "mercantilist" campaign claims by foreign nations.

But the real truth is that the Chinese government has come out with a series of measures that aim to readjust economic development and actively expand its imports to achieve a trade balance.

In order to tackle the negative influence of the global financial crisis, China also adopted a 4 trillion yuan (427 billion euros) economic stimulus plan to expand its domestic demand. Such an approach also helped trigger a global economic rebound.

The degree of openness in China is fast expanding. If the mercantilism and protectionism are spreading, then China itself should be one of its biggest victims. The reality is that China is now more keen than ever and willing to join hands with other nations to prevent mercantilism and protectionism.

Needless to say, the long-term trade surplus has helped bolster China's international balance of payments, boosted its GDP growth and provided more employment opportunities to migrant workers.

But the trade surplus has continued for nearly two decades and will lead to a situation where economic growth is far too reliant on external demand, resulting in low yields from exports. Such a situation will add more pressure for yuan appreciation and increase trade frictions with major partners.

I have worked in the United States and New Zealand for some time. The two countries are long-term deficit countries. They attach great importance to developing export markets as their exports help in maintaining GDP growth and boosting employment.

At the same time, the domestic markets in these nations are quite open. Their growth of imports has been faster than the growth of exports. Large-scale imports of foreign products did not affect the economic growth of these nations, their employment or exports, because the competition from imported products had triggered the less-advantaged industry to shift to new industries.

This has given birth to the development of new industries, and it also promoted the upgrading and restructuring of some traditional export-oriented industries.

Purchasing power has improved and people in these nations can now buy more foreign goods at cheaper prices. These nations are also able to lessen the upward pressure on cost growth and inflation.

If you see the economic growth, employment and trade balance situation by comparing the key members in the Organization of Economic Cooperation and Development (OECD), you will find there is no necessary link between a country's economic growth, employment and a country's trade surplus or deficit situation. As long as imports are reasonable and effective, the surplus will not affect national economic development.