China expects large surplus in 2011 balance of payments

China will continue to post a relatively large balance-of-payments surplus in 2011, according to the "2010 China Balance of Payments Report" recently released by the State Administration of Foreign Exchange (SAFE). The administration said it will step up the crackdown on hot money inflows.

According to SAFE's balance-of-payments analysis group, there are four sound reasons for China's relatively large surplus in 2011. First, the steady global economic recovery has substantially boosted international trade and investment activities. The International Monetary Fund (IMF) forecasted in January that the global economy would grow by more than 4 percent in 2011, a little lower than the growth rate in 2010.

Second, China's economy will grow faster than the economies of most other countries, and it will continue to attract large amounts of foreign capital. The IMF forecasted that developed and emerging economies will grow by nearly 3 percent and 7 percent, respectively, in 2011, with China expected to grow by more than 9 percent.

Third, net speculative fund inflows will likely rise due to the macroeconomic policy differences as well as the interest-rate and exchange-rate gap between China and major developed countries.

Fourth, more Chinese companies may choose to raise funds in foreign markets due to the strict macro-control policy at home, lower funding costs abroad, among other factors.

The SAFE predicted that China's overall balance of payments would continue to improve in 2011. Major developed countries are faced with a jobless recovery in which the economy grows but job losses persist, and the difficult employment situation may not improve dramatically in the short term.

Furthermore, the domestic consumption of developed countries will remain sluggish because of the prolonged process of deleveraging, which is the economic jargon for paying down debt. During the 12th Five-Year Plan period (2011-2015), China will strengthen its macro-control policy and accelerate the economic restructuring to turn domestic demand into the main driving force behind its economic growth.

China's economy will recover faster than most other countries, and its imports will maintain a relatively rapid growth rate. Furthermore, China's trade balance will continue to improve.

By People's Daily Online

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