context: A significant trade surplus can create tensions with other trading partners, something Beijing would likely want to avoid as trade pressure already mounts with the West. The PRC trade surplus has remained high over the past few years, reaching US$82.6 bn most recently in May, a four-month high. Calls have been made in the past to reduce the surplus and for the country to expand imports. But major policy moves on this front have yet to emerge or take effect.
An article written by Hu Angang 胡鞍钢 Tsinghua University Institute for Contemporary China Studies director and Zhang Penglong 张鹏龙 Tsinghua University School of Public Policy and Management associate professor argues that the PRC should actively expand imports. The two experts further unpacks some rationale and more details
- the PRC's huge foreign exchange reserve (US$3.13 tn in 2022) and trade surplus (US$ 868 bn in 2022) provide a good foundation for the PRC to expand imports
- e.g. the PRC has historically adopted an export-oriented growth model
- this has brought advantages in sectors like manufacturing at the cost of consumer welfare loss
- e.g. the PRC has historically adopted an export-oriented growth model
- the PRC should actively expand imports to achieve trade balance
- this could be done via
- expanding the number of import trading partners
- leverage international resources (e.g. energy), international technology (high-tech) and markets
- focus on increasing imports of energy resource products and domestic agricultural products in short supply
- apply zero tariffs to energy resource products in short supply and strategic products (including important agricultural products)
- this could help to safeguard supply chain resilience, food, resource and energy security
- this could be done via
- the PRC has the potential to become the world's biggest buyer in achieving trade balance by stepping up import volumes
- especially in key areas such as resources, energy, food and livestock
- the PRC should expand agricultural and key resource imports from countries like Brazil
- it should seek greater opening up in intellectual property, key technologies and parts
- trade cooperation with the US should be expanded, especially in agricultural crops such as soybeans
- the PRC should actively seek cooperation with domestic interest groups in the US
- this move can lower decoupling risks from the US
- especially in key areas such as resources, energy, food and livestock