China's trade surplus amounted to $177.5 billion last year, an increase of $75.5 billion or a massive 74 percent over 2005. Trade officials said it is still within a normal range and its upward trend is due to the country's industrial and macroeconomic structure. How has this hefty trade surplus been shaped and what effects has it produced on the national economy? Mou Xinsheng, Director of the General Administration of Customs, gives his analysis in an exclusive interview with People's Daily.

People's Daily: China has reported an annual increase of over 20 percent in its foreign trade since its entry to the World Trade Organization in December 2001. What impact has the vigorous momentum in its external trade growth brought to the Chinese economy and the global economy as a whole?

Mou Xinsheng: Sound growth in external trade has played a crucial role in solving contradictions in the growth of China's economy, making Chinese commodities more competitive overseas, beefing up the country's national strength and contributing more to the world economy.

For years, commodity trade surplus has been a leading source of the fast expansion of China's foreign exchange reserves, which surpassed $200 billion in late 2001 and topped $1 trillion at the end of 2006. The country's accumulated commodity trade surplus reached $367.5 billion from 2001 to 2006, or 43 percent of the incremental foreign exchange reserves during the period.

Compared with many other nations, China's development is more open and outwardly oriented to spur on global economic growth and the country has been able to maintain a high growth rate for years. Trade insiders have said the contributory rate of its overseas trade to the global trade growth had remained at approximately 10 percent between 2003 and 2005, contributing tremendously to the all-round recovery of the world economy.

What causes China's huge trade surplus?

Trade surplus represents an inevitable outcome of China's policy on active use of capital from overseas and unique trade mix, and is also a normal manifestation of the sustained and healthy development of the domestic economy. The trade mix, with processing trade as the pillar and foreign firms as the mainstay, is the prime factor for the consecutive trade surplus in overseas trade. The total amount of China's trade surplus reached $177.5 billion, including a general trade surplus of $83.1 billion, whereas the processing trade surplus shot up to $188.9 billion, outstripping the total.