Vol. 5 Num 694 Sat. May 13, 2006  

Soaring trade surplus highlights China's 'lopsided' economy

China's inflation stayed low in April, while the trade surplus more than doubled, showing how hard it is to make the economy depend less on exports and rely more on consumption, analysts said Friday.

The statistics underlined the basic challenge policy makers face as they strive to make the nation's 1.3 billion people spend more and have domestic spending account for a larger share of growth in Asia's second-largest economy, analysts argued.

"Investment is the largest growth engine, and the second engine is exports. Consumption is just a follower, not a driver," said Chen Xingdong, chief China economist with BNP Paribas Peregrine in Beijing.

"It's not easy for the government to change. Consumption is determined by consumers, not determined by the government," he said.

China's gross domestic product expanded by 10.2 percent in the first quarter of the year, making it the world's fastest growing major economy, but that is not the only thing that puts the country in a league of its own.

The consumer price index, the main inflation gauge, rose just 1.2 percent last month from a year earlier, the National Bureau of Statistics said Friday.

To some economists, who looked at the figure against the backdrop of double-digit growth, it sounded odd, bordering on the unbelievable.

"It begs the question whether these figures are accurate, are they really reflecting what's going on in the economy?" said Tai Hui, a Hong Kong-based economist with Standard Chartered.

In sharp contrast to the low-inflation environment, the April trade surplus soared 128 percent from a year earlier to 10.5 billion dollars, customs authorities said Friday.

Exports in April were up 23.9 percent to 76.9 billion dollars, while imports were up by a more moderate 15.3 percent to 66.5 billion dollars, the customs authorities said.

According to observers, the data did not necessarily reflect a Chinese export juggernaut rolling on, crushing everything in its path. The interesting figure to look at was the relatively slow growth in imports.

It was, they said, a case of China's own industries, some of them with considerable excess capacity after years of investment, turning their attention to making products that have so far been imported from abroad.