Expansion of domestic demand is now the most efficient way to reduce trade surplus, Zhou Xiaochuan, China's central bank governor, was quoted by the China Securities Journal as saying on Wednesday.

Zhou, governor of the People's Bank of China, made the remark at a seminar on China's capital market. The domestic demand stimulation is even much more effective than the foreign exchange rate change in reducing trade surplus, he said.

Figures from Chinese customs show that in the first nine months this year, China's export volume soared 31.3 percent to 546.42 billion US dollars, with trade surplus standing at 68.33 billion US dollars.

Some foreign countries blamed China for keeping low exchange rate of Renminbi to boost its export, although China appreciated its currency by more than 2 percent in July.

The country should encourage domestic consumption to increase import and make better use of the huge sum of money deposited in banks, Zhou said.

In the first nine months, China's import volume stood at 478.09 billion US dollars, only growing 16 percent, 15.3 percentage points lower than that in the same period last year, according to Chinese customs.

China is a country of high rate of bank saving, and especially after the Asian financial crisis in 1998, the country's deposit rate rose 0.5 percentage point annually, Zhou said.

China has become a net exporter of capital, so the country has to pay intensive attention to the economic globalization, he said.

According to the 2006-2010 Program for National Economic and Social Development just drawn up by the government, China will continue to pursue economic and social development adhering to the policy of expanding domestic demand.

The United States also started to realize the importance of stimulating China's domestic consumption.

At the just-concluded 17th meeting of the Sino-US Joint Economic Commission (JEC), US Treasury Secretary John Snow said he opposes trade sanction proposal by some US senators against China on RMB issue.

He spoke highly of China's strategy to boost domestic demand in its 11th Five Year Plan so as to reduce trade surplus at high position.

Meanwhile, Zhou emphasized the important role played by financial institutions in capital market.

The reform of microstructure of financial institutions is of far-reaching impact upon the development of capital market, he said, underlining the forceful supervision and regulatory work in this area.

China has again announced that it will never yield to outside pressure on RMB exchange rate regime, saying that any change belongs to China's own affairs.

Source: Xinhua