China does not export inflation to other countries, expert

Chinanews, Beijing, Aug. 14 – The rise of the prices of exported goods is the result of the rising costs, the Renminbi appreciation and Chinese exporters' growing capability in setting prices. China does not export inflation to other countries, said Mei Xinyu, a Ph.D holder who now works at the International Trade and Economic Cooperation Research Institute under the Ministry of Commerce.   China's export trade is dominated by processing trade and foreign-funded enterprises. The rise of the prices of exported goods is largely determined by the price rise of goods in intermediate chains. Since most of the goods in intermediate chains are imported from other countries, China can not control the prices of these goods, Mei said on Friday.   Since the mid 1990s, China changed from a country that merely exported primary products and imported finished products to one that imported a large number of primary products. At present, China is the largest importer of copper, manganese and other mineral resources. In addition, China is the world’s third largest oil importer, only next to the United States and Japan.   The price rise of exported goods, according to Mei, is caused by excessive liquidity, which by itself is caused by the loose monetary policy adopted by governments in Western countries years ago. In Japan, for example, the Japanese government carried out a zero interest monetary policy. In the United States, from January 2001 to June 2003, the Federal Reserves cut down its interest rates thirteen times. As for China, excessive liquidity problem is caused by issuing too much base money, a measure taken in response to China's large foreign exchange reserves. The large foreign exchange reserves in China are caused by the high international payments surplus. In some way, China's large trade surplus is a manifestation of the high US fiscal deficits. In order to solve the problem, it will not make any sense for China to act alone. Rather, governments from US, Europe and Japan should work with China to jointly solve the problem, Mei said.   Some experts say that on the whole, the price rise of exported goods is a good thing for China. It indicates that China has improved its position in the international labor division and interest distribution.