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November 19, 2011

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Adviser: Trade surplus may turn into a deficit

CHINA'S trade surplus may turn into a deficit in two years' time, making the conflict over the yuan redundant, Li Daokui, adviser to the People's Bank of China, said yesterday.

"Within two years, China's trade surplus may disappear or even become negative as domestic demand rises," Li said at a summit in Beijing organized by the Economist Newspaper Ltd. "By then, the Chinese currency may even face pressure to depreciate."

He called on Chinese people not to care too much about the increasing global pressure on China to let the yuan appreciate more, saying it is a natural political response of Western countries when their economies are in trouble.

China's trade surplus aggregated to US$124 billion in the first 10 months of this year, down 15.4 percent from a year ago. Some analysts expect the surplus may settle at around US$150 billion this year, compared with US$183 billion in 2010. Trade surplus once accounted for more than 8 percent of China's gross domestic product. But last year, it made up less than 3 percent of its economic output, and has continued to reduce, falling to 1.4 percent in the first 10 months.

The yuan has appreciated nearly 8 percent against the US dollar since June 2010 when China announced it will hasten its exchange rate reform.

Li expected Chinese people's income to double in three years, which will help China's trade strike a better balance.




 

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