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China's trade surplus hits new high in Oct.
POSTED: 8:58 a.m. EDT, November 10,2006
BEIJING, Nov. 9 (Xinhua) -- China's monthly trade surplus reached 23.8 billion U.S. dollars in October, 8.5 billion U.S. dollars higher than in September, according to statistics from the General Administration of Customs.

In October, exports jumped 29.6 percent year on year to 88.1 billion dollars, while imports grew 14.7 percent to 64.3 billion dollars.

According to the data, China's total trade surplus for the first 10 months of the year was more than 133.6 billion dollars.

The latest statistics broke the monthly record set in August, when the trade surplus hit 18.8 billion dollars. September's surplus was 14.3 billion dollars

Zhong Wei, a professor with the financial research center of the Beijing Normal University, attributed the hike to seasonal factors.

"As Christmas nears, foreign traders are beginning to buy large quantities of Chinese-made products," said Zhong.

He added that it will be difficult for China to achieve trade balance within five years -- a Ministry of Commerce target -- as international manufacturers continue to move their export-oriented production to China.

China's ever increasing trade surplus has fueled international criticism that the undervalued Chinese currency, or Renminbi, gives Chinese goods price advantages in international markets.

Under the pressure, the government revalued the yuan in July last year and allowed it to float within a 0.3 percent band from the official central parity rate.

However, trade surpluses have continued to mount, bringing the country's foreign exchange reserves to 987.9 billion dollars by the end of September, up 28.46 percent year-on-year.

Adjusting the yuan's exchange rate will not stop the reserves from rising, but may ease the pressure, said Zhong.

"The key is to develop a mature foreign exchange market," suggested Zhong.

Expanding domestic consumption could also reduce the economy's reliance on exports and put a hold on the continuous, rapid growth of trade surpluses and foreign exchange reserves, said Ba Shusong, an expert with the Development Research Center of the State Council.

To stimulate consumption, the government take measures that encourage people to spend their savings sitting in banks, said Ha Jiming, an economist with the China International Capital Corporation Limited.

China should hold foreign exchange reserves of about 800 billion dollars for China and spend the surplus to help sustain the development of the economy, said Zhong.

China's foreign exchange reserves are expected to exceed 1 trillion dollars some time this month.

"The government should use the reserves to buy oil fields, mines and even farmland, and build a strategic reserve of resources corresponding with the country's economic achievement," said Wang Jian, secretary general of the China Society of Macroeconomics.

He also urged the government to import advanced technological and research from developed countries.

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