What measures should China take to cope with the problems arising from its hefty trade surplus?
The immense trade surplus has inflicted new headaches upon China, such as growing trade disputes with its principal trading partners, rising risks for its export enterprises to encounter trade barriers on overseas markets, and stepped-up global pressure on its management of foreign exchange reserves, as well as hidden risks for inflation in its domestic economy. To cope with these problems, efforts should be taken not only to transform the mode of export growth, but also to expand domestic consumption. First, it is important to increase imports and boost the consumer market at home. For this purpose, the social security system should be improved to stimulate consumption. Second, efforts should also be made to upgrade the processing trade and, by capitalizing on the expansion of the trade, to restrict the production of commodities listed under the restrictive categories. Furthermore, some essential adjustments should be made with respect to the policy on use of capital from overseas. Am
