China must cut savings to reduce surplus: Zhou

Font Size

Print

Feedback

Email

Discuss

May 11: China needs to save less to boost consumption and narrow the trade surplus, said People’s Bank of China Governor Zhou Xiaochuan.

``The government has pledged to boost consumption and cut the surpluses in the trade and capital accounts,’’ Zhou said at the Lujiazui Financial Forum in Shanghai. That “requires that we reduce the current high savings ratio,’’ he said.

China’s trade surplus is pumping cash into the world’s fastest-growing major economy, threatening to stoke inflation that jumped to an 11-year high of 8% in the first quarter. April’s trade gap was about $16.8 billion, according to figures derived from ministry of commerce data released on Friday. Zhou didn’t refer to the role of currency appreciation in slowing export gains. Growth in China’s overseas shipments has cooled this year as economies around the world weaken and the US skirts a recession.

China has conflicting targets, the central banker said. “On the one hand, we need to boost consumption to adjust the economic growth structure, but on the other hand we also need to prevent excessive demand from fueling inflation,’’ Zhou said.

“We need to balance those targets so that more savings are spent, while the spending doesn’t add too much pressure for inflation.’’ The household savings rate needs to fall, Zhou said.