2010-08-11 15:23

China's swelling trade surplus has presented yet again remarkable proof of the resilience of Chinese exporters and, at the same time, the increased difficulty of cutting down the country's reliance on exports for growth.

If the nation is to effectively rebalance growth away from exports and investment to domestic consumption, more structural reforms, rather than a hasty revaluation of the renminbi, are badly needed.

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Latest statistics show that China's monthly trade surplus trumped almost all forecasts to hit an 18-month high, up 170 percent from a year earlier to $28.7 billion.

In view of the fragile global recovery, most observers believed China could hardly run an even larger monthly trade surplus than what it posted in June, a whopping $20 billion.

Nevertheless, Chinese exporters have managed to sell more last month while import growth has slowed in line with a looming domestic slowdown. On a monthly basis, China's exports in July were up 5.9 percent from June, but imports edged down 0.4 percent from the previous month.

With a trade surplus close to the largest China has ever seen and record overseas sales in July, Chinese exporters have shown impressive capacity to survive what is arguably the worst global recession in more than half a century.

It seems likely that the export sector will remain a powerful growth engine of the Chinese economy for many more years.

That may disappoint people who anticipated a steady decline in China's trade surplus to reduce global imbalances rapidly.

But it is not a reason to tout faster appreciation of the Chinese currency as a panacea. The real solution to China's swelling trade surplus must include long-term reforms to enrich Chinese consumers and boost their consumption levels.