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SAFE: overly large surplus reflects accelerating overcapacity
www.chinanews.cn 2006-05-05 14:56:00
Chinanews, May 5 - In recent years, China's balance of payments has
experienced an increasing surplus. The surplus was US$223.8 billion in
2005, rising 3.3 fold over that of 2001. The Sate Administration of
Foreign Exchange (SAFE) stated recently that this implies certain
imbalances existing in domestic economic operations, such as comparative
overcapacity, have been aggravated.
SAFE indicated that the balance-of-payments position is a reflection of
domestic economic operations on the external economy. The proportion of
China's current account surplus to gross domestic product (GDP) increased
from 1.3% in 2001 to 7.2% in 2005. Current account surplus not only
reflects that national savings are greater than domestic investment, but
also reflects that gross output surpasses total demand, which means
comparative overcapacity.
According to the 2005 balance-of-payments report published by SAFE,
though China's investment demand has grown rapidly in recent years,
national savings have increased even faster, therefore the gap between
savings and investment has continued to widen, resulting in the current
account surplus. It is estimated that China's investment rate (domestic
capital formation to GDP) rose from 38% in 2001 to 46% in 2005. The ratio
of national savings (national savings to GDP) hiked from 40% to nearly
50% in the same period. China's national savings, including household
savings, corporate savings and government savings, have all seen
relatively rapid growth in recent years.
In addition to the surging current account surplus, China's capital and
financial accounts have also maintained surpluses and direct investment
has risen steadily in recent years. In the 10th Five-Year Plan period
(2001-2005), China absorbed US$270 billion of foreign direct investment
(FDI), ranking No. 3 in the world and No. 1 among developing counties.
This not only signifies the great superiority of China in attracting FDI,
but is also related, to a certain extent, to policies that encourage
foreign capital influx. Moreover, owing to the underdeveloped financial
market in China, some domestic enterprises have to seek financing
overseas, which intensifies the foreign capital inflow to some extent.
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