Trade surplus may triple to US$100b

China's trade surplus will likely triple to more than US$100 billion this year, a government economist said.

"When I travel abroad, everything I pick up in stores says `made in China'," Yao Jingyuan , chief economist at China's National Bureau of Statistics, said in Beijing yesterday. "This trend will cause more trade disputes.

"We must continue to negotiate with our trading partners. But we also must pay more attention to managing our domestic manufacturers to make sure they don't use only a high-volume, price-cutting approach to exports."

Industrial profit growth slowed from 49.5 per cent from 1999 to 2003, to 38.1 per cent last year, and declined to 20.1 per cent in the first nine months of this year, he said.

"If you strip out the high-profit margins of industries such as coal and oil, you're looking at only 7.9 per cent profit growth for most industries in China," Mr Yao said.

China's economy this year would grow at a slower rate than last year's 9.5 per cent, said Mr Yao, who estimated growth would be between 9 per cent and 9.4 per cent, with the economy possibly reaching US$1.9 trillion.

The number of unprofitable companies had risen by 57.6 per cent in the first nine months of the year, he said, without giving a total.

"We must make sure our exporters don't just blindly export for the sake of exporting," Mr Yao said. "This not only leads to trade disputes, it also leads to the rise in loss-making enterprises."

Bird flu may also threaten the nation's economy, he said.

"We don't know exactly what the bird flu impact will be," he said. "The government has the experience of controlling epidemics from the Sars crisis of a few years ago, but nevertheless, we must not underestimate bird flu and its potential impact. We don't know what the total cost will be, but the sum could be quite huge."

Mr Yao also expected consumer price inflation, after averaging about 2 per cent this year, would remain benign next year. Inflationary pressure, which has eased thanks to falling grain prices, would remain muted next year, he said. But he maintained that: "My personal view is the possibility of deflation is very small."

Mr Yao said fixed-asset investment growth had slowed from annual rates of more than 50 per cent in early last year, thanks to government curbs. Growth in recent months has been about 27 per cent, but he warned of the dangers of demand failing to keep pace with increased supply.

Taking up the same theme, assistant central bank governor Yi Gang said Beijing would pursue relatively stable fiscal and monetary policies geared towards boosting domestic demand, especially consumption in rural areas.

Repeating the authorities' standard line, he told the forum authorities would keep the exchange rate of the yuan basically stable at a balanced and rational level.