As the growth rate of exports reached 32.7 percent and imports merely 14 percent, China reported an unexpected trade surplus of 39.6 billion US dollars in the first half year, almost equal to the total trade surplus for the whole year of 2004.

The restrained domestic investment demand, which was caused by a series of economic macro-control policies, is the main factor leading to the deceleration of China's import growth, according to analysts.

For a long time, China's imports were boosted by domestic investment, which slowed down its growth rate this year due to the macro-control policies, said Zhao Jinping, an economist with the State Council Development and Research Center, quoted by the China Economic Times. Since late 2003, China began to adopt a series of macro-control policies to cool down its overheating economy and curb the wild growth of fixed asset investment, including raising interest rates for reloans and rediscounts and tightening land use.

In the first half of this year, the urban fixed asset investment only grew 26.4 percent year on year, 8.4 percentage point lower than the same period last year. Meanwhile China's import growth rate was only 14 percent, much lower than that of the first six months in 2004, which stood at 43 percent.

For those sectors such as iron and steel, which witnessed rapid growth in both investment and import in the past two years, the import growth rates slumped this year, which demonstrates the achievement of the macro-control policies, said Zhao.

Zhang Yansheng, director of the Foreign Economic Institute of the State Development and Reform Commission, agreed on this point of view. Due to the cooling down of domestic investment, Zhang said, the import growth of raw materials including crude oil, iron ore and copper geared down this year.

In the first half of this year, China's import of crude oil grew 5.1 percent year on year, and that of refined oil decreased 21.6 percent.

Meanwhile, China only imported 64,000 automobiles and 10.7 million tons of rolled steel, down by 33.6 percent and 31.5 percent, respectively. Some business people, expecting the country's currency, Renminbi, to be appreciated this year, chose to reduce imports so as to avoid risks, which also led to the slow growth of China's imports, Zhang said.

The devaluation of US dollars from last year to the first quarter this year is another cause, said Zhu Baoliang, an economist with the State Information Center.

Since the Renminbi was pegged to the US dollars at that time, the devaluation of US dollars meant the devaluation of the Renminbi, which restrained China's imports and stimulated its exports, Zhu said.

The rapid development of some domestic industries such as the automotive industry also contributed to the deceleration of imports, according to analysts with China's Ministry of Commerce.

Both Zhao Jinping and Zhu Baoliang predicted China's import for the whole year to grow by around 20 percent. The appreciation of the Renminbi would help imports to grow faster in the latter half of this year, Zhu said.

Source: Xinhua