With its economic growth attracting global attention in the past 20-plus years of reform and opening-up, China has now become the third trade nation globally; its foreign exchange (Forex) reserve has exceeded one trillion US dollars, and it has drawn most foreign direct investment (FDI) among the developing nations. Meanwhile, China has become a leading source of investment for some African and Latin American countries. What do these achievements mean to other countries?

China has been turned into a reliable base for the manufacture of products and an important export market, and the contribution made by its economic development has far overtaken its ratio to the global economic growth �C these constitute the gist of an exclusive interview given by Bert Hofman, the chief economist of the World Banks' China representative office, to People's Daily Overseas Edition reporters Xing Yuanyuan and Yin Weixin. Its detailed account runs as follows:

Q: How do you look at the present situation in China's trade?

A. Trade expansion is more obvious than GDP growth in China. Its average annual increase in trade has topped 16 percent and import growth has also been on rise since 1978. The pace of export growth has just been much faster than that of import growth in recent years and trade surplus has hit an all-time high along with a growing number of cases of friction with the United States and the European Union (EU). At present, the tempo of China's export growth has exceeded 35 percent, and this will possibly fill some countries with worries.

From a global perspective, China's trade growth is, of course, good to the global trade. The country's production efficiency for certain products is higher than that of those nations in making such products in the past, and an efficiency increase is beneficial. In fact, to most Asian nations, China has become the most vital export market. Its entry into the WTO has given rise to the structural regrouping of its production networks and prompted it to be turned into a reliable production base.

Q. China has drawn the biggest amount of overseas capital among the developing nations, and some countries are increasingly concerned with their own national interests, and how do you look at this problem?

A. Such concerns seem to be somewhat groundless. The ratio of China's FDI to the global FDI has been relatively stable in the past decade. Evidence has proven that China's absorbing foreign capital does not infringe upon the interests of other countries. FDI of overseas investors has picked up over recent years in the whole Asia region though it has been reduced in the region for some time after the Asian financial crisis in the late 1990s. The total sum of FDI inflow into the Southeast Asia region reached 15 billion dollars in 2005. In the first half of 2006, the amount of FDI continued to increase in Malaysia, Philippines and Thailand, despite a drop of FDI in Indonesia. Meanwhile, the outbound investment of economies in Southeast Asia, mainly Indonesia and Malaysia, has reported a rapid rise in the past two or three years, with an indication that the newly-emerged transnational firms in Southeast Asia have pursued their own overseas investment and production strategies.

Q. Why do you regard China as a capital exporter?

A. Calculating based on some relevant statistics, China is the biggest depositor worldwide, as its outstanding deposit balance (equal to a surplus under constant account) outstrips GDP by more than 7 percent. Its 1 trillion-strong Forex reserve exceeds the addition of the accumulated FDI to foreign debts. The excessive Forex reserve is not necessarily a good thing to China but it can be a good thing for other countries. The central bank in China has all along purchased US bonds as a means of a Forex reserve investment. Such capital export would possibly continue as more Chinese enterprises intend to "go global."

Furthermore, new phenomena have appeared in the country's foreign aid sphere. In view of export credit, the China Import/Export Bank has a very big loaning scale with its payment volume outstripping 15 billion dollars each year. China has made its unique contribution in a debt-reduction endeavor by the Asia Pacific Economic Cooperation (APEC) nations under the framework of the "Logic of Debt Relief for the Poorest Countries". At the Beijing Summit and Third Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC) held in early Nov. 2006, both sides reiterated their aspiration to build good ties. African nations, like developing nations elsewhere in the world, can benefit from the substantial successful experience from China's policies of poverty alleviation and accelerated development.

Q. Overall, what kind of impact do you think China's economic growth has brought to the global economic development?

A. Many people are concerned with China's fast-pace economic growth that can negatively effect the global environment. At present, China is the second energy user or consumer and likewise the second greenhouse gas emitter. If this trend goes on unchecked, the country will have become the biggest greenhouse discharger by 2010, according to the World Energy Outlook issued the International Energy Agency recently. Such views or forecasts, however, need to be annotated. First, the present trend can hardly be sustained and, second, China's pollution is not caused by the country itself alone.

With respect to its growing impact on the global economy, what inclined to be negligent are China's development outlook and innovations. To date, research and development funds only make up 1.4 percent of the GDP in the country, still lagging far behind most of the developed nations, but there have been some hastened increases in recent years. Apart from a greater input in its higher education, China has increased its college or university enrolment rate from 6 percent to close to 20 percent in the past decade. In line with the latest data available, the number of patents China had granted rose to more than 30,000 in 2004 from a yearly average of merely less than 5,000 a decade ago, and over half of them are granted to Chinese citizens. At the same time, there has been also an increase in the number of patents that have been granted to Chinese citizens by other countries. So it is possible for China to become a major source of innovation and new-brand goods in the years ahead. So the country can establish a still better innovation system and accelerate its impact in the new sphere of knowledge-related innovations through the ways of improving the intellectual property right protection and prioritizing and optimizing the strong points in the performances of both research institutes and government organs.

By People's Daily Online