New policies will aim to eliminate trade surplus

The government intends to introduce new policies to spur consumption in order to eliminate the country's rising trade surplus and reduce pressure from trading partners flooded by Chinese imports, People's Bank of China Governor Zhou Xiaochuan said yesterday.

'Our policy is to cut the trade surplus to zero if possible,' Mr Zhou said at a meeting of central bankers in Beijing. 'We want to use new policies to increase consumption.'

The conference was attended by European Central Bank president Jean-Claude Trichet and Bank of Japan deputy governor Toshiro Muto, while United States Federal Reserve chairman Alan Greenspan spoke via videolink.

Political pressure has been mounting on Beijing to revalue the yuan. Trade partners, led by the US, argue the currency is undervalued and provides an unfair trade advantage.

Analysts say the economic conditions for a revaluation are now in place and the decision is essentially political. 'From an economic point of view the best time for revaluation is now,' said Michael Pettis, a professor at Peking University's Guanghua School of Management. 'There's really no advantage in waiting.'

In his statements yesterday, Mr Zhou seemed to indicate China would implement policies other than a revaluation to ease pressure from trading partners. Raising the proportion of consumer spending in China's overall GDP has been a long-term goal of the government for years.