The American side shuns an issue of a surplus in its service trade to China, and China only receives part of the fees from the products it has processed from its processing trade, and this is the gist of an exclusive interview given by Chen Wenjing, vice-president of the Chinese Academy of International Trade and Economic Cooperation with reporters of "People's Daily", a leading newspaper in China.

There was a gap of over 100 billion US dollars in the Sino-US trade surplus last year owing to difference involved in the statistical norms concerning the trade between China and the United States, Chen noted. A bilateral trade surplus will go on increasing this year, according to trade insiders here, and it is expected to reach some 140 billion dollars, and Chen queried what causes so big statistical differences? (The questions and answers of Chen's recent interview are as follows.)

Q. There was a disparity of over 100 billion US dollars in the Sino-US trade surplus least year. In your view, what do you think causes so big a statistical gap?

A. I owe an imbalance in Sino-US trade to factors from many aspects, not only to differences in economics and trade mix and the relevant policies of both sides but to the international division of labor and the transfer of trade deficit derived from the adjustment and transfer of global industrial structures; not only to differences from the angle and statistical methods of both nations, but also to the concepts and approaches adopted by both nations to deal with these problems.

In view of product mix, commodities can be classified mainly into three major categories. The first category is made up of products from the resource of petroleum, the second category is composed of the products that complement the industrial structure of the U.S., including chiefly textiles and light industrial goods with low-technology contents, and the third category comprises capital and technology-intensified products, including mainly automobiles, semi-conductors and computers. Deficits to the first two categories of products are cited as the rational ones, which complement each other, whereas deficit from the third category is a competitive one, which is of concern to the Americans, but still requires concrete analyses.

Q. In what fields is the U.S.' trade surplus in its China trade manifested?

A. Service trade is neglected or overlooked from the deficit statistics in Sino-US trade. The service trade surplus for the American side is not mentioned every time the U.S. speaks of its trade deficit. As a matter of fact, the U.S. has all along maintained a surplus in its service trade to China and with a good momentum recorded in the past dozen years. The American side has kept up asking China to open its markets in the banking and insurance spheres. China is opening up: the US Citibank and insurance firms have come to settle in China and the Renminbi (RMB) business is currently opening to banks from overseas. What is regrettable is that the US side, however, avoids the topic of its trade surplus in its service trade with China but focuses only on its commodity trade with the country.

Q. How much overblown are the statistics with China's export value?

A. Processing trade constitutes a crucial component part of China's external trade, making up more than 50 percent. In its processing trade, however, China only earned a very tiny proportion of the fees from the processing business. But at the arrival of these products in the U.S. and other overseas markets, they are reckoned for their export value instead of the added value, so China's actual export volume is over-exaggerated. In other words, what actual interests China acquires is not the gross export value. If the surplus from the processing trade is deducted, its trade surplus with overseas will be cut anywhere from 80 percent to 90 percent.

Q. What effect does the direct investment of US firms in China have on the statistical figures of trade surplus?

A. The investment of the U.S. in China has brought changes to the trade patterns and flows. The very fact that the U.S. exports much less to China than what it imports from the country does not show fully the actual interest the U.S. has attained. The more and more products it used to export to China have now shifted to be made in the country. This has not only raised the market share of the US firms in China but has helped reduce the direct exports from the U.S., and this change has not been shown eloquently in trade statistics of both sides. Preliminary statistics indicate that the sales volume of commodities made by the US-funded firms in China reached more than 75 billion US dollars in 2004 alone, and the statistics from the Chinese side showed the US trade deficit that year was 80.2 billion US dollars and, if the sales volume of 75 billion dollars was written off, then the real trade deficit would be only 5 billion dollars. Moreover, some of these products would be sold or re-exported in the U.S. though they are produced by US firms in China.

Q. How do you look at the Sino-US trade surplus?

A. Surplus is not an issue worth being quibbled over, and I hope that the issue will be looked upon with a sober mind.

Trade surplus is merely a statistical parameter, and trade deficit cannot be simply termed as a loss, or trade surplus regarded simply as a profit. From the economics point of view, it would be meaningless if the sole attention is given to a single topic of bilateral trade deficit.

New and high technology has contributed tremendlously to the growth of US economy in recent years. The U.S. has eliminated some of the labor-intensified manufacturing sectors of low added value, and it has worked hard and diligently to expand its service trade. On the contrary, China has, in its process of globalization, taken up in a massive way the general manufacturing industry, which has been transferred from globalization and it makes each other's deficit with the United States in the division of labor. Meanwhile, it is universally acknowledged that the China-made products are cheap and in good quality to the welcome of American consumers. At the time when the overall US trade deficit is on rise, it is not difficult to understand that its China trade deficit grows accordingly.

Q. How do you view the increasing popularity of Chinese goods in the U.S.?

A. Trade imbalance cannot represent everything, and the interests involved should also be taken into account. For instance, the introduction of cheap but good-quality Chinese goods into the U.S. has contributed to some extent in curbing inflation in the U.S. and other Western nations while brining benefits to American consumers.

In short, Sino-US trade imbalance constitutes a normal phenomenon in bilateral trade as well as an issue in the course of development, which cannot be settled overnight, but has to be treated and handled correctly with a farsightedness and a responsible attitude.

Q. What do you think both sides should do to ease bilateral trade surplus?

A. The United States and China are the biggest trade partners and they can acquire their respective interests in the course of globalization. Hence, they should not quibble over this issue but actively resort to measures to alleviate trade surplus. China should, among other viable measures, spur the upgrading of its industries, expand its domestic consumption, inspire its enterprises to invest in the U.S. and implement the strategy for diversified markets. At the same time, the United States also needs to take some substantial and rational moves to enlarge bilateral trade by the means of extending service trade and lifting ban and restrictions on its high-tech export to China, so as to maintain the healthy growth of bilateral trade. Provided these measures are taken, it can be rested assured that the perspectives for Sino-US trade are splendid.

By People's Daily Online