With bilateral trade surpluses reaching US$194 billion last year, China’s trade with the rest of the Asia has slackened owing to the increase in supply chains, which sought manufacturing inputs from its neighbors.
The largest conributor to the trade surplus was the assembly and export of imported intermediate items, whose inputs were exempted from tariffs, the Asian Development Bank said in its 2007 country report.
The ADB added that the surge in trade surplus was sparked by high tourism receipts and the interest income from its huge foreign exchange reserves thereby boosting its current account surplus to arround US$227 billion, equivalent to 8.6 percent of its GDP.
Last year, its foreign direct investments grew to $63 billion, an improvement from its 2005 figure, which mostly flowed into property and stocks, the ADB said.
Foreign exchange reserves reached $1.07 trillion by year-end, which prompted discussions on how to use its huge reserves more efficiently thereby encouraing calls from its trading partners to appreciate its currency.
In order to liberalize its capital account, the residents were allowed to purchase foreign securities through a Qualified Domestic Institutional Investors Plan, the report noted.
However, economic growth is seen to slow down a bit this year and in 2008, although it will remain close to 10 percent of its GDP. Likewise, industrial growth is expected to slow down at 11 percent in 2007 and to 10.8 percent next year because of some significant oversupply in some sectors, a slower growth in investments and the easing up of export growth caused by softer external markets.
Although the people will benefit from the new official emphasis in agricultural development policies, mostly in the rural areas. It is expected that agricultural production is seen to increase by 5.4 percent in the next two years. While services are also expected to grow by 10.5 percent, as against 10.3 percent last year. This was due to the government’s encouragement for more consumption driven economy and so with expenditures for the 2008 Olympic Games.