Trade Surplus

 

China will strive to reduce its " excessively large" trade surplus to ensure the sustained development of both domestic economy and foreign trade, said Wen.

 

China recorded a sizzling economic growth of 10.7 percent in 2006, largely powered by strong exports, which rose 33 percent to 86.62 billion U.S. dollars.

 

Despite a slight 1.2 percentage points down in export growth and 2.4 percentage points up in import growth, China's trade surplus last year expanded to a record 177.5 billion dollars, up 74 percent from the previous record of 101.9 billion dollars set in 2005.

 

The surplus kept surging 67.3 percent in January from a year ago to 15.88 billion U.S. dollars, a dangerous level to ignite inflation and aggravating already tense trading relations between the world's fourth largest economy and its major trade partners, which press China for further currency appreciation.

 

RMB exchange rate

 

Wen said the nation will improve the mechanism for setting the RMB exchange rate and seek ways to use the massive state foreign exchange reserves appropriately.

 

The RMB value has risen by more than six percent since July 21, 2005, when the Chinese government launched the reform of exchange rate system to allow the yuan to float against the U.S. dollar within a daily band of 0.3 percent around the official central parity rate.

 

The central parity of RMB against the U.S. dollar was 7.7453 yuan per U.S. dollar on March 2, compared with the rate of 8.28 yuan per U.S. dollar before the reform.