China is seeking more balanced trade with its major trading partners, and making gradual reform of its yuan exchange rate mechanism. This comes amid the country's shrinking trade surplus. Guan Xin looks at China's plans to encourage imports, and expand domestic demand.

Chinese currency the yuan touched a fresh high against the US dollar on Friday, at 6.5671. That's nearly 4 percent up since June last year, when the central bank announced improved flexibility of yuan exchange rate. And there's still pressure to appreciate further...

Tan Yaling, Chair of China Forex Investment Research Inst., said, "From the end of last year, the market expectations of yuan appreciation in 2011 have been pushed to 3 to 6 percent."

But the US and some other countries still think the appreciation is not enough, and criticize China saying it artificially holds down the value of yuan to bolster exports. Chinese economists don't agree.

"The trade surplus is mainly due to the high saving rate of China and low saving rate of the US. China does not agree that its currency is undervalued. Only one-way appreciation is risky." Tan said.

China will continue to reform its foreign exchange rate mechanism over the year. But the government says a gradual pace of reform, rather than drastic fluctuations, will be better for China's economy and the world. On the other hand, the country is making efforts to encourage imports to make foreign trade structure more balanced.

A commerce official says several measures have been taken to encourage imports, as in the nation's new foreign trade strategy.

The nation's strategy to expand domestic demand has taken effect...The ratio of China's current account surplus to GDP is down to 4.6 percent, significantly below the peak of 11.3 percent reached in 2007. Officials says the trade surplus will continue to fall, and will be within 100 billion US dollars this year.

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