SEOUL: China will be able to agree to US proposals for rebalancing trade and can cut its surplus from exports “dramatically” within three years, said Li Daokui, an academic adviser to the Chinese central bank. The nation has the “political and economic foundation” for agreeing to targets for current-account surpluses and deficits, Li told reporters today at an economic forum in Beijing. He was commenting on US Treasury Timothy F. Geithner's suggestion that a level of 4 percent of gross domestic product could be used as a benchmark for judging trade imbalances. China is under intensified pressure from major trading partners including the US and Europe to let its currency appreciate faster, ahead of a meeting of Group of 20 leaders next month in South Korea. Talks between G-20 finance ministers and central bankers this month concluded with a pledge to examine guidelines for current-account surpluses and deficits without specifying any goal. “China should have the confidence to, and is fully capable of, substantially reducing its trade surplus within three years,” Li said, adding that “it won't take five years.” “China can act on its own initiative to reduce trade surplus instead of acting under external pressure.” Li's comment echoed a pledge made by deputy central bank governor Yi Gang during a meeting of the International Monetary Fund on Oct. 9. Yi said that China plans to cut its current- account surplus to below 4 percent of GDP in the next three to five years, from 5.8 percent in 2009 and 11 percent in 2007. The current account is the broadest measure of trade because it includes investment and transfer income. Saudi Arabia, Germany, Russia and China all have surpluses larger than 4 percent, while Turkey and South Africa have deficits bigger than that, according to the IMF. Li, a professor at Beijing-based Tsinghua University with a Harvard University Ph.D. in economics, said China didn't oppose Geithner's proposed trade target at the G-20 meeting earlier this month, citing his own information. Even as China runs a trade surplus, the nation has curbed the yuan's rise to about 2 percent since a June pledge to introduce more flexibility, arguing anything other than a gradual appreciation could cause social and economic disruption. At the same time, the US Federal Reserve has sent the dollar tumbling by leaning toward buying more assets to tackle unemployment near a 26-year high and weak inflation.
