CHINA / National |
Wu: China will do its part in sorting global imbalances(Xinhua)Updated: 2007-06-01 14:59 BRUSSELS -- China will do its part and make concerted efforts with major economic players to sort out global imbalances, a top official from the country's central bank said on Thursday. With huge surplus in both current and capital accounts, China, the leading emerging economy, has become an easy target to be blamed for global imbalances. The "double surpluses", which contribute to the country's enlarging foreign reserves, is actually an inevitable reflection of global imbalances, Deputy Governor of the People's Bank of China Wu Xiaoling told the Eighth Brussels Economic Forum here. Although China enjoys a surplus amounting to billions of dollars annually with the United States, the Eastern Asian emerging economy is in deficit with some of its Southeast Asian neighbors and oil-exporting countries. Part of China's surplus was actually diverted from other countries as a result of the re-mapping of global productivity, Wu said. For example, China's share of the total foreign trade surplus with the U.S. increased from 27.2 percent in 1998 to 41.7 percent in 2005. Meanwhile, the percentage for Southeast Asian countries fell from 30.9 percent to 12 percent. Wu said that the present set of global imbalances had various reasons behind them, such as allocation of production factors under the context of globalization, uneven level of savings and investments among different countries, as well as relatively fast growth of productivity in emerging economies, etc. Major economic players, through multilateral consultations "have to make concerted efforts" to sort out global imbalances in an orderly fashion, in which China will play its role, she said. Wu said that China will continue to make the exchange regime of its currency RMB more flexible. China's central bank recently widened the RMB trading band from a 0.3 percent daily movement against the US dollar to 0.5 percent, a new move likely to allow further appreciation of the RMB. The RMB closed slightly higher against the dollar on Thursday after hitting a new high since China introduced a RMB exchange rate reform and scrapped its peg to the US dollar in July 2005. Some US officials have blamed the Chinese currency for the United States' ballooning trade deficit with China, claiming that the RMB has given Chinese exporters a favorable competitive edge. However, Wu said, exchange rate reform was not the fundamental solution to global imbalances since it can not change the layout of global productivity, one of the causes behind the present set of imbalances. The reform will simply divert surplus from China to other emerging economies, she added. Compared to exchange rate reform, it would be more effective to spur consumption, she said. To this end, the Chinese government will, on the one hand, try to improve its social security system, which may relieve people from concern of future support and in turn reduce passive savings. And on the other hand, people's income should be raised to promote consumption, Wu said. "We have to take measures to boost consumption. We have to have a very solid social security system, to reduce passive savings," Wu said, adding, "We have to increase income so that households can have more consumption." The Chinese government will also streamline its foreign exchange policy by abandoning export-oriented incentives and import substitution. In addition, China is encouraging its companies to invest abroad as well as making progress on how to utilize the attracted foreign investments, Wu said. |
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