Exports surged 36.6 percent year-on-year in the first two months of 2005 to reach US$95.3 billion, while imports edged up 8.3 percent to US$84.2 billion, the Ministry of Commerce announced on Thursday.

The figures resulted in a trade surplus of US$11.1 billion, compared with a deficit of US$7.9 billion in the same period last year.

In February alone, exports were up 31.0 percent to US$44.5 billion, while imports slumped 5.0 percent to US$39.9 billion. The month's trade surplus was US$4.6 billion, following a surplus of US$6.5 billion in January.

China's trade surplus for 2004 exceeded US$30 billion.

"We believe that textile exports are a major contributor to strong export growth," said Goldman Sachs Asia economist Liang Hong.

Global textile quotas blocking the free flow of textiles were scrapped on January 1, and strong demand from Europe and the United States could see China's textile and apparel exports increase by 15 percent to more than US$110 billion this year.

Foreign-funded companies are also contributing to the export boom. According to a report released this week by the Ministry of Commerce, foreign-funded companies' exports accounted for nearly 58 percent of China's total exports last year.

But the import growth data is much weaker than expected. Liang believes the main cause is the slowdown in fixed-asset investment.

The National Bureau of Statistics is scheduled to release retail sales and fixed-asset investment figures next week.

But last year's high base should be taken into consideration when analyzing this year's import slowdown. The figures have soared in recent years as the country has bought more raw materials and machinery to feed its rapidly growing economy.

Liang believes net exports have become an important driver of GDP growth, judging from the strong trade surplus.

At the ongoing Third Session of the 10th National People's Congress, Minister of the National Development and Reform Commission Ma Kai forecast that total trade would rise 15 percent year-on-year in 2005. Imports and exports would be roughly balanced.

Deutsche Bank economist Ma Jun anticipates export growth to decelerate to 22 percent this year as a result of a slight slowdown in the global economy and new export taxes in China.

On the import side, China's reduction in tariffs, combined with high oil prices, will drive imports up, leading to a slight narrowing of the trade surplus this year, Ma said.

(China Daily March 11, 2005)