Commerce Minister Bo Xilai answers questions at a joint press conference with Zhou Xiaochuan, governor of the People's Bank of China or the central bank, on China's trade and monetary policy in the Great Hall of the People in Beijing on March 12, 2007.

The total sales of US-funded enterprises in China and their exports, using China as a base, to other parts of the world stood at US$110 billion, said Bo on the sidelines of the annual session of China's parliament.

Combining this figure with America's surplus in service trade and deficit in goods trade, one can find that the trade between the two countries is balanced, noted the minister. China's trade surplus with the US exceeded US$140 billion last year.

He pointed out that the bilateral trade is mutually beneficial, with the surplus going to the world's fastest growing major economy and the profits flowing to the world's most powerful nation.

"Only because of mutual benefit could the Sino-US trade be going smoothly, expanding all the way and doing better and better," said Bo.

"The US traders are wise and we have no grounds for suspicion. They will not do business with China if they can not make profits," Bo said.

Bo reiterated the country's opposition to a 27.5 punitive tariff proposed by some US lawmakers on all Chinese exports.

"If the proposal goes ahead, it will be destructive to the current bilateral trade which is developing healthily, as well as disastrous news to both countries' enterprises that have achieved double-win in the relationship," said he.

The minister believed the slap of the tariff, if passed, is out of line with WTO rules.

"If such a policy is enforced, it is not only trade protectionism, but also trade hegemony," noted Bo.

Doha round of talks

On the increasing trade frictions between China and major trading partners, especially the US and EU, Bo said he hoped that most of the problems could be solved through talks. But China will also respect the related parties' choice to turn to the WTO mechanism.

Bo pledged to make active contributions to the Doha round of talks which hit snags due to developed countries' reluctance to reduce agricultural subsidies and tariff.

China has done a lot for the WTO multilateral mechanism, said Bo. China's overall tariff level stands at 9.9 percent, compared with the world's average of 39 percent; China's tariff on non-agricultural products is 9 percent while the world's average is 29 percent; China levies 15 percent for agricultural imports while the world collects an average of 60 percent, elaborated he.

On China's opening of service trade which is often criticized by the western countries, the minister revealed that China has opened up 100 of the 160 categories specified by the WTO rules, 46 more than the average of 54 for developing economies. "The US has opened just one more than us. Therefore, China has shown a lot of courage."

Trade with Africa defended

Bo rejected the western countries' criticism of China's trade with the African countries, asking the Europeans and the Americans to examine themselves before criticizing China.

"An important criticism is that China is taking oil from Africa. But according to statistics, out of Africa's total oil export last year, China accounts for a mere 8.7 percent, compared with 36 percent for Europe and 33 percent for the US," said Bo.

"If 8.7 percent of the import is an exploitation of resources, then how should we look at 36 percent and 33 percent?" asked the minister.

He went on to quote some African leaders as saying that it was only after China entered Africa and engaged in more trade with the continent that some resources in Africa began to display their real market value, implying that the resources were taken away at very low prices before.

"China is doing reasonable, fair businesses at just market prices with African countries," said Bo.

Central bank vows to fight inflation

Central bank governor Zhou Xiaochuan pledged to contain inflation at the joint press conference with Bo to ensure that the purchasing power of the Chinese do not decrease.

"For the central bank, the importance of this can not be overemphasized," said Zhou.

The country's consumer price index might have grown 2.8 percent in January, according to a poll of 21 economists by Bloomberg News. The projected growth is just slightly lower than the 3 percent annual target of the central bank, fueling speculations that Zhou's administration will increase the interest rate.

Zhou promised that the country's monetary policy would be more transparent and predicable, or more in consensus with the public and the industries."This is the major trend."

However, he did not expect the future policies to accord with all schools of economists. "When a policy is out, some will say it is in line with their expectations, but others believe it is a surprise," said he.

In addition, Zhou said his bank does not hope to see the launch of a certain monetary policy helps speculative activities as it will give a bad signal.

The recent Chinese stock market plunge was not caused by changes in the economic fundamentals and is unlikely to lead to major trend changes, said the governor. China's stock market fell nearly 9 percent on February 27, the largest one-day fall in a decade, followed by a global stock market sell-off.

That showed the growing integration of Chinese and global equity market, said Zhou, vowing to further develop the country's capital markets.

When asked to offer some advice for investors, he suggested retail investors reading some books on finance, which will help them allocate their investments.

China's stock market witnessed a bullish run last year, growing more than 130 percent. Millions of Chinese are pouring their money into the equity market for the limited number of quality shares, pushing up the prices.

The shares in the Shanghai Stock Exchange and Shenzhen Stock Exchange are trading at 33 times earnings on average, well above the 15 in developed western markets, fueling talks of bubbles.

(China Daily March 12, 2007)