China to take steps to balance surplus
(AP)
Updated: 2006-05-06 16:30
HYDERABAD, India (AP) -- China plans to address its huge trade surplus by
boosting imports, increasing domestic demand and reducing export tax rebates, a
senior Chinese official said Saturday.
China is facing intense pressure from the United States and other partners to
deal with its soaring trade surplus, which more than tripled to a record US$102
billion (euro85 billion) last year from US$32 billion (euro26.6 billion) in
2004.
China's trade surplus "indicates latent risk of economic fluctuations," said
Li Yong, China's vice finance minister, in a presentation at the Asian
Development Bank's annual meeting in the southern Indian city of Hyderabad.
He said China would gradually integrate the corporate taxes paid by domestic
and foreign companies to help address the trade surplus.
China's gross domestic product grew by a faster-than-expected 10.2 percent in
the first quarter this year, prompting concerns that the economy could once
again be overheating.
Li said the government was taking measures to cool investment in overheated
sectors, especially construction materials.
Investment-led growth in China's economy remains strong, and an increasing
number of sectors are plagued by overcapacity, he said.
The investment boom has been fueled by cheap lending from China's banks.
China raised its yuan lending rates by 27 basis points on April 28 in an
attempt to dry up excess liquidity and discourage fast lending growth. It was
the first interest rate hike since October 2004.
"China will adjust interest rates in the future if necessary" to smooth the
volatility of the country's rapidly growing economy, he said.
China's economy is expected to rise 9.5 percent this year as the government
maintains prudent fiscal and monetary policy, he said.
The ADB meeting ends later Saturday.
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