By Zhao Jinping
Date: 2004/05/12
Abstract:
The enormous trade deficit in the first quarter is a result from not only short-term factors such as over investment and price hiking, but also the long-term factors such as the changing international division of labor and relocation of industries, as well as policy readjustment effects. The prediction for the year 2004 is: annual growth rate of import will exceed that of export, which will cut down the cumulated huge trade surplus over the years; the short-term trade deficit (due to falling demand from abroad) will reduce the pressure on RMB appreciation and inflation; negative impact on economic development is limited; when there is trade deficit and less pressure on the currency, the next thing to do is to prepare for exchange rate reform and allow higher flexibility of exchange rate.