While friction between China and the US continues over their large trade imbalance, the World Trade Organization (WTO) addressed the gap in its first review of China's trade policy since the nation joined the global body at the end of 2001.

 

According to the WTO, China's surplus with the US and the EU is a structural issue and partially reflects Asia's current trade composition.

 

A report is due to be published officially in April but was released by the WTO Secretariat on Friday.

 

The Chinese mainland's trade surplus with both the US and the EU has been pushed up as a result of production and exports by investors from Taiwan, South Korea and Japan.

 

Taiwan enjoyed a trade surplus of US$58 billion with the Chinese mainland last year, topping all economies in the world including South Korea, which posted a surplus of US$42 billion with China in the same year to become the No 2 surplus earner. Japan was in third place with US$16.5 billion, according to the report.

 

Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, said that to some extent, China has been a scapegoat for the trade imbalance problem. He said the report gave a fair picture of China's role in global trade and for years, the sources of both China's trade surplus and deficit have become relatively stable.

 

China suffers from a huge deficit in trade with East Asian countries and regions and major energy and raw materials producers. Meanwhile, China has enjoyed great trade surpluses with the US, the EU and non-oil exporters.

 

"As those economies shift their exports to the Chinese mainland through investment, their previous trade friction with the US and the EU has been eased. The mainland has begun to bear the brunt of trade pressure," Mei said.

 

China's ballooning export trade over the past three years has caused concern among other WTO member countries over whether China's foreign trade systems and policies are in line with international trade regulations and whether China has delivered on its promises to the world upon its WTO accession, according to the report.

 

Song Hong, a trade expert from the Chinese Academy of Social Sciences, said the EU and the US are used to finding faults with China and, when trade imbalance happens, they are skeptical as to whether it is fully opening its markets or complying with WTO promises.

 

"But, in fact, it's a problem born of globalization," said Song.

 

About 60 to 80 percent of China's export value is generated by foreign-invested enterprises. Much of the country's growing exports come from enterprises owned by cross-national companies, including many based in the US, he said.

 

The trade imbalance between China and the US is a structural problem in international, rather than bilateral, trade. He suggested that if the US wants to find the cause of its growing trade deficit, it should check with of its major trade partners.

 

(China Daily March 21, 2006)