[Xinhua News Agency reporter]: Minister Chen, China’s trade surplus has attracted attention from both home and abroad. What is your comment on China’s foreign trade prospect in 2011? Do you think the trade surplus for 2011 will further contract?
[Chen Deming]: This is actually about expectations for the future, because we have just experienced the fi rst two months of the year 2011. I think the overall prospect for this year’s foreign trade is good, but still full of un- certainties and diffi culties. T e general guideline for trade policy this year is“stabilize the exports, expand imports and reduce trade surplus”. Under current circumstances, many uncertain factors have made the global economic recovery unstable; risks to the fi nancial system of the countries suff ering sovereign-debt crisis have not been eliminated; fl uctuations of the world bulk commodity prices and the exchange rate are still high; trade protectionism is on the rise. T ese factors combined might make the growth rate of China’s foreign trade contract, compared with previous years. From a domestic perspective, we also face the rising price of raw materials, rising labor costs and labor shortage problems in some regions. T e demands on our energy saving and environmental protection will rise and there are more factors contributing to the rising costs. So we have such a basic judgment about export: it might increase, but at a low speed.
As for the imports, its growth will outpace the export, because we have accelerated the structural adjustment and optimization, and promote the free trade zone strategy to facilitate the imports. We therefore hold a basic judgment that the trade surplus/GDP ratio for this year will further contract, which will ease the pressure of excessive trade surplus. But it is impossible to witness trade defi cit within the next several months. T anks.
[China daily Reporter]: Minister Chen. You have shed light on the expansion of imports many times. I notice the written report of the press conference says that this year China will increase the imports of advanced technology and equipment, and key components. My question is how will this purpose be realized? T rough reduction of import tariff or other methods? In addition, the report also mentions the expanding of the import channel for bulk commodities like grain and cotton. What particular measures will China adopt? You also said in your answer to the fi rst question that the trade surplus/ GDP ratio will further contract. I remember the number for last year is 3.2%. Do you think it will fall below 3%? T ank you.
[Chen Deming]: I regret to tell you that I made no comments on the prediction accuracies, because the number is really hard to calculate. Last year it was 3.1%, and I think the trade surplus/GDP ratio might be lower. In fact,
the GDP growth rate these years has been very high, while the trade surplus has been reducing sharply. The trade surplus for 2010 has fallen by more than 38% compared with the peak number of 2008 before the fi nancial crisis. T is is really a hard-earned achievement due to our structural re-adjustments and change of growth mode.
About expanding the imports, I just mentioned that it will be related to advanced and new technologies, the environmental industry and our needed resources. Most importantly we should consider how to facilitate the foreign trade. As for the tariff rate, we have also made some research but could not release the results before we reach a consensus. Personally speaking, I hope we could further our initiative on this part. As for the imports of key agricultural means of production as you have mentioned, we would not increase the trade volume by a large margin, because the WTO (world trade organization) adopts a series of management measures on the imports of certain bulk agricultural materials, such as grain and cotton. T ese measures include import quotas and sliding duties. Take cotton for example, the tariff imposed on cotton within 2 million t will rise if the import volume exceeds 2 million. T is tariff mechanism is to protect domestic cotton production and ensure the price stability of the world cotton market. Since China is a large country, if the Chinese corporations purchase en mass from the global market, the global bulk commodity price will fl uctuate sharply. We should take responsibility for this, and expand the imports according to the consumer needs, because all the products would be taken by willing consumers, including each one of you. Another issue on the agenda is our negotiation with some Western countries, in hope of eliminating or reducing the trade barriers to China’s exports.
We all know that although our trade surplus is shrinking, last year witnessed our trade surplus with the U.S. accounted for 99% of the more than 180 billion in total. Therefore it is very important for us to discuss the trade balance issue with the United States. In the past two years, we have attached great importance to expanding imports from the United States, which improved our bilateral trade balances, and showed the sincerity of the Chinese side. We hope that our sincerity would receive positive response from the American side. So we are negotiating with the Americans and hope that the U.S. would repeal the act that restricts the American exports to China; give equal treatments to the American corporations; and facilitate the entry of American products into the Chinese market. In that case the U.S. unemployment rate will fall; its economic recovery will speed up, and the U.S.-China trade balance will be improved. So among the measures to expand imports, Premier Wen Jiabao specially emphasized on importing more from the least developed countries and top source countries of China’s trade surplus. For all least developed countries, we aim to impose zero tariffs on 95% of their exported products to China within three years.
Last year we reduced 47% tariff on all exported products from least developed countries. In the next two years we will impose zero tariffs on more than 95% of the 7000 varieties of products. This is a unilateral measure we have adopted after the Doha round of trade talks had failed to reach the consensus. Currently we have a minor trade deficit with these countries in most bilateral trade. And the United States is the major source of China’s trade surplus, accounting for 99% of our total surplus. T ese points are what I want to stress, and I hope my explanation would further your understanding about these issues and help you reach a consensus.
[China Economic News Reporter]: the price hike is related to excess liquidity. Will the People’s Bank of China tighten the credit system and raise the deposit reserve rate?
[Zhou Xiaochuan]: Everyone knows that the world financial crisis broke out two years ago. To cope with such a crisis, we naturally adopted a package of simulative policies, including the proactive fi nancial policies and moderately loose monetary policies. During that period, the central bank actually favored the excess liquidity in the market. You are right to mention that the excess liquidity will lead to price rise. T erefore, based on our judgments on the crisis trend and recovery prospect, it should be noticed that since the January 2010, the central bank has begun to reduce the excess liquidity by raising the deposit reserve rate. After that some uncertain factors appeared, such as the European sovereignty debt crisis and the gloomy U.S. economy and job market in August. We should take into consideration these uncertain factors, since they are existent until today. Generally speaking, at that time the central bank had tried to reduce the excess liquidity in the market, and this approach is still quite necessary now, especially this year we have changed our monetary policy to a sound one. We will continue using all policy tools to manage the liquidity issue. Of course, we not only use such tools to tighten the credit system, but also adjust the degree of policies, which reflect the general guideline of our economic work and the sound monetary policy.
[France, “Point” reporter]: China is doing an experiment by using RMB as a currency in cross-border trade settlement. Also, China is furthering its reform of the RMB exchange rate mechanism. Could you please share with us a timetable for the full RMB convertibility? For example, RMB is scheduled to become a full convertible currency in the year 2015 or 2020.
[Hu Xiaolian]: Let me answer this question. We have made great progress in the cross-border trade RMB settlement in areas of cross-border settlements, overseas project fi nancing, RMB outbound direct investment, and RMB inbound direct investments by foreign enterprises. Some conditions are necessary for the development of the cross-border RMB settlement, and I think the convertibility of capital account you have just mentioned is a very important part of the cross-border RMB settlement. But currently speaking, it is still a necessary, rather than an indispensable condition, because the Chinese capital account has not been fully convertible. Under such circumstances, we have still made substantial achievements in the cross-border RMB settlement. But looking to its future trend, we will further our eff orts on the full convertibility of capital accounts, and also, I believe the market demands for cross-border RMB settlement will grow. So the two parts will promote each other. It can be visualized that the degree of capital account convertibility will rise, and during this process, it will become more and more conducive to the development of cross-border RMB settlements. We also believe that the development of cross-border RMB settlement will promote and boost demands for the convertibility of RMB capital accounts. Thanks. As for the timetable for the full convertibility, its progress will depend on many factors once we set the objective. We think that the conditions have been changing in favor of the full convertibility of capital accounts, and in the next fi ve years, we will see a remarkable progress. But we still don’t know on what particular date this will be realized, because it still hinges on the external conditions.
[Taiwan Industry and Commerce Times reporter]: through sustained efforts from both sides, the Chinese Mainland and Taiwan have recently signed the Economic Cooperation Framework Agreement (ECFA). Will it be possible that the cross-straits currency clearing mechanism be launched in the near future? Will the Fujian West Coast Economic Zone be used as a pilot experiment? In your judgment, what are the priorities in cross-straits fi nancial co operations?
[Yi Gang]: We are making proactive explorations of the cross-straits clearing mechanism, and currently we have made preparations for the cash reserve, and the corporations and fi nancial institutions involved also express that their cash flow is smooth. We would expand our cooperative business based on the current clearing arrangements, because I think the cross-straits financial co operations will increase. We are know that some banks, fi nancial institu- tions and securities traders are highly enthusiastic about doing business in the Chinese Mainland, and banks from the Chinese Mainland are also beginning to set offices in Taiwan, and planning to conduct business there. As the crossstraits trade grows, especially when the trade scale expands, the cross-straits investments will be increasingly intermingled and interactive. As the trade and investment develop, the development of fi nancing co operations will be inevitable and should follow up. T at is to say, the financial institutions should provide financial services for the corporations and traders, in which we will foresee larger achievements. In addition, the fi nancial infrastructure development, which is necessary to such financial services, is also undergoing sustained and systematic progress. As for the preparation for clearing, it is a very important part of infrastructure construction for fi nancial service channels, to which we give high priority. We have been discussing this issue with the Taiwan part, and I hope substantial progress will be made in the clearing arrangement of cash and other items.
[Chinanews reporter]: Minister Xie, this year China will exercise proactive fi nancial policy and promote a stable and rapid economic development. In front of the new conditions and tasks, what will be the changes in the dynamics and priorities of China’s proactive fi nancial policy?
[Xie Xuren]: T e Chinese government has decided to adopt proactive financial policy, which is a remarkable decision after a full analysis of the change in the economic environment both home and abroad.
Meanwhile, we have raised the public investment in coping with the global fi nancial crisis, and we still need to invest more in those projects under construction. This year is the first year

of our “Twelfth Five-year Plan”, we need more capital investments in launching the key projects in the “Twelfth Five-year Plan”, strengthening the weak links of the economic and social developments, and further improving people’s livelihood and the social security level. T ese factors combined lead us to continue the proactive fi nancial policy.
To implement well this fi nancial policy, we need to keep a rapid and stable economic development, manage well the relations between economic structural adjustment and infl ationary expectations, and give special priority to stabilizing the general level of commodities. Specifi cally, we need to manage well the fi ve following parts for this year:
First, we need to further raise the income of both urban and rural residents, expand people’s consumption demands. At the same time, we should further improve a series of policy measures to promote consumption, and guide consumption.
Second, we should optimize the investment structure and strengthen the weak links in the economic and social developments. T is year the central government will mainly invest into the constructing indemnifi catory housing projects; developing agricultural infrastructure that mainly includes water conservancy projects; promoting the development of education services, medical health services and cultural business. We will also raise investments in energy saving, emission reduction, ecological conservation and environmental protections, to promote the economic structural adjustments and the development of certain strategic industries. At the same time, we will take great initiative in guiding social capital investments. A good arrangement of these public investments will boost internal demands and also lay a solid foundation for the further developments.
T ird, we need to improve and adjust the taxation policy to promote the corporate development and guide residents’ consumption. T is year we will further reform and improve the taxation system, clean up and regulate administrative institutional fees and government-managed fund, let the taxation play a better role in adjusting economy and income distribution, to speed up the transformation of economic development mode, promote the economic structural adjustment and promote the development of the service industry.
Fourth, we should further optimize the structure of financial expenditure, to ensure and improve people’s livelihood. We always grasp this point when making the national budget for this year. We will reduce general expenditures, and raise the expenditures in agriculture, rural areas and farmers, education services, medical health services, social security and other social undertakings. We will raise the transfer payment to less developed regions, promote economic structural adjustment, environmental protections and technology advancement, to further ensure and improve people’s livelihood, and promote various social undertakings of our country.
Fifth, we will lend great support to the economic structural adjustments and regional coordinated development, and promote the transformation of economic development mode. T is year China will raise investments in technology development, promote independent innovations, corporate technical reform, and industry structural upgrading. We will further our eff orts to support energy saving and emission reduction, accelerate the development of the compensation mechanism of the ecological environment, and promote the resource saving and environmental protection work. We will further implement various favorable fi nancial and taxation policies, promote the coordinated development between rural and urban areas, and promote regional developments, especially the social developments in regions of ethnic minorities, impoverished regions and old revolutionary base areas.
[International Finance News reporter]: what industries will the Ministry of Finance support in export tax rebates in 2011?
[Xie Xuren]: In 2011, we will continue to adopt the tax rebate policy and measures, to further adjust and optimize the export structure. We will promote the exports of mechanical and electrical products and products with special features and advantages. Meanwhile, we would use the taxation policy to restrict the export of products that highly consume energy and pollute the environment. We will use these policy measures to promote the stability of the global market. On the other hand, we will try our best to increase imports of needed energy, raw materials, key components and advanced equipment and technologies, to further improve the terms of trade.