People's Daily

Overseas Edition: How do you look at the present situation in China's trade?

Bert Hofman: Trade expansion is more obvious than GDP (gross domestic product) growth in China. Its average annual increase in trade has topped 16 percent and import growth has also been on the rise since 1978. The pace of export growth has just been much faster than that of import growth in recent years and trade surplus has hit an all-time high along with a growing number of cases of friction with the United States and the European Union. At present, the tempo of China's export growth has exceeded 35 percent, and this will possibly fill some countries with worries.

From a global perspective, China's trade growth is, of course, good for global trade. The country's production efficiency for certain products is higher than that of those nations in making such products in the past, and an efficiency increase is beneficial. In fact, to most Asian nations, China has become the most vital export market. Its entry into the World Trade Organization has given rise to the structural regrouping of its production networks and prompted it to be turned into a reliable production base.

China has attracted the biggest amount of overseas capital among developing nations, and some countries are increasingly concerned with their own national interests. Do you see this as a problem?

Such concerns seem to be somewhat groundless. The ratio of China's FDI (foreign direct investment) to the global FDI has been relatively stable in the past decade. Evidence has proven that China's absorbing foreign capital does not infringe upon the interests of other countries. FDI of overseas investors has picked up over recent years in the whole of Asia though it was reduced in the region for some time after the Asian financial crisis in the late 1990s. The total sum of FDI inflow into the Southeast Asia region reached $15 billion in 2005. In the first half of 2006, the amount of FDI continued to increase in Malaysia, the Philippines and Thailand, despite a drop in Indonesia. Meanwhile, the outbound investment of economies in Southeast Asia, mainly Indonesia and Malaysia, has reported a rapid rise in the past two or three years, with an indication that the newly emerged transnational firms in Southeast Asia have pursued their own overseas investment and production strategies.

Why do you regard China as a capital exporter?

Calculating based on some relevant statistics, China is the biggest depositor worldwide, as its outstanding deposit balance outstrips GDP by more than 7 percent. Its $1 trillion-strong foreign exchange reserves exceed the addition of the accumulated FDI to foreign debts. The excessive foreign exchange reserves are not necessarily a good thing to China but it can be a good thing for other countries. The central bank in China has all along purchased U.S. bonds as a means of foreign exchange reserves investment. Such capital export would possibly continue as more Chinese enterprises intend to "go global."

Furthermore, new phenomena have appeared in the country's foreign aid sphere. In view of export credit, the Export-Import Bank of China has a very big loaning scale with its payment volume outstripping $15 billion each year. China has made its unique contribution in a debt-reduction endeavor by the Asia Pacific Economic Cooperation economies under the framework of the "Logic of Debt Relief for the Poorest Countries." At the Beijing Summit and the Third Ministerial Conference of the Forum on China-Africa Cooperation held in early November 2006, both sides reiterated their aspiration to build good ties. African nations, like developing nations elsewhere in the world, can benefit from the substantial successful experience from China's policies of poverty alleviation and accelerated development.

Overall, what kind of impact do you think China's economic growth has brought to global economic development?

Many people are concerned with China's fast-pace economic growth, saying it can negatively affect the global environment. At present, China is the second energy user or consumer and likewise the second greenhouse gas emitter. If this trend goes on unchecked, the country will have become the biggest greenhouse discharger by 2010, according to the World Energy Outlook issued by the International Energy Agency recently. Such views or forecasts, however, need to be annotated. First, the present trend can hardly be sustained and, second, China's pollution is not caused by the country itself.

With respect to its growing impact on the global economy, China's development outlook and innovations are inclined to be negligent. To date, research and development funds only make up 1.4 percent of the GDP in the country, still lagging far behind most of developed nations, but there have been some hastened increases in recent years. Apart from a greater input in its higher education, China has increased its college or university enrollment rate from 6 percent to close to 20 percent in the past decade. In line with the latest data available, the number of patents China granted rose to more than 30,000 in 2004 from a yearly average of less than 5,000 a decade ago, and over half of them were granted to Chinese citizens. At the same time, there has been also an increase in the number of patents that have been granted to Chinese citizens by other countries. So it is possible for China to become a major source of innovation and new-brand goods in the years ahead. This means the country can establish a still better innovation system and accelerate its impact on the new sphere of knowledge-related innovations through the ways of improving the intellectual property rights protection and prioritizing and optimizing the strong points in the performance of both research institutes and government organs.