Moving from an aggregate deficit of US$950 million in the first eight months of last year to a surplus of US$60.8 billion during the same period this year, China has unmistakably demonstrated growing competitiveness in the global market.

But an unprecedented trade surplus does not mean all is well, especially as China's influence on the world economy has become so conspicuous.

Aware of the potential disputes a rapid growth in trade surplus may lead to, policy-makers have repeatedly made clear that it is not the country's intention to pursue an ever-expanding trading gap.

Yet, as the likelihood of China becoming a world manufacturing centre has increasingly been realized through the accelerated influx of foreign investment in recent years, the economy has more closely followed the beat of the market than the baton of the policy-makers.

Optimistic forecasts put the total trade surplus for this year at US$100 billion - double the largest annual figure in the country's history.

This prediction is supported well by the latest customs statistics.

In the first three quarters of this year, trade volume reached US$1,024.5 billion, up 23.7 percent from the same period last year. Meanwhile, the trade surplus amounted to US$68.3 billion.

Given the usually larger trade volume of the fourth quarter, it is possible the annual trade surplus reaches US$100 billion.

With abundant, relatively cheap and skilled labour, China is bound to secure a substantial slice of international trade in terms of labour-intensive products.

Nevertheless, the huge trade surplus, stemming from robust exports and only moderately slowed imports, is apparently not what policy-makers predicted at the beginning of this year.

To continue efforts to cool investment growth in some overheated sectors, the government has made macro-economic control a top priority.

On the other hand, to reduce the burden of soaring foreign exchange reserves on the country's monetary policy and to prevent further trade disputes with other countries, the authorities have slashed tax rebates for exports of some goods.

But despite these signals from the policy-makers, the economy has kept roaring ahead by tapping whatever demand it can meet. As domestic consumption remains weak, manufacturers have turned more eagerly to overseas markets - naturally pushing up the country's export volume.

According to the analysis of some Chinese economists, responding to the uncertainty centring on the exchange rate of renminbi, a number of domestic traders have expedited exports while postponing imports, to avoid currency exchange risks.

The current ballooning trade surplus will definitely contribute a lot to the growth of the national economy this year.

Equally, a sudden slowdown would exert tremendous pressure on the economy at a later stage.

Since the record trade surplus will be hard to sustain, domestically for energy and resources reasons and internationally because of trade disputes, China must prepare for the fallout.

Last year, it was breakneck investment growth that offset the impact of a temporary trade deficit on the national economy. But excessive investment growth has also proved unaffordable. The only option is to expand domestic consumption.

As the country's trade surplus may exceed US$100 billion, it is time to shift the government's efforts from boosting exports to stimulating domestic consumption.

(China Daily October 26, 2005)