Solution to trade imbalance depends on expanding domestic demand: bank official

The correction of China's trade imbalance hinges on the expansion of domestic demand, and the appreciation of the yuan should only support this policy, according to a central bank official.

Yi Gang, an assistant to the central bank governor of the People's Bank of China (PBOC), made the remarks on Thursday at an international symposium on global economic imbalance.

His remarks came in response to recent claims that China's huge trade surplus, which amounted to 109.9 billion U.S. dollars in September and is expected to surpass 150 billion dollars at the end of the year, was due to the yuan being undervalued.

Yi insisted that expanding domestic consumption, especially consumption in rural areas and consumption in the service sector, is the key to reducing the imbalance.

He urged China to increase imports, improve the flexibility of the foreign exchange rate, strengthen protection of the environment and improve working conditions.

The rising price of labor and raw materials will contribute to resolving the problem, he noted.

Gong Fangxiong, director of JP Morgan's China Research Department, also said in an interview with Shanghai Securities News that the government's macro control efforts should not focus entirely on regulating the foreign exchange rate and the interest rate.

Structure regulation and control, such as increasing the cost of land, resources and labor, may be more effective, he said.

Source: Xinhua