China's trade surplus hit 13 billion US dollars this May, setting a monthly record for this year. Trade surplus has accumulated to 46.773 billion US dollars in the first five months of 2006.

Zhang indicated that when the Customs General Administration of China released these figures on June 12, overseas concern about China's huge overall trade surplus this year heightened.

The early 2006 forecast of "controlling the trade surplus to under 80 billion USD this year" seems to be beyond reach in view of the current situation.

Zhang said that the trade surplus issue is mainly due to many international factors.

China has gotten to its position of having a trade surplus through its advantage in its industrial structure in the last decade, and this advantage may continue for another ten years.

Zhang noted that since the end of last year, the Chinese government has adopted many measures in an attempt to control the trade surplus.

The government has done a lot of what it could do by restricting the export of resource-related products through a slight RMB appreciation. However one cannot entirely count on the Chinese government's macro-control to solve the entire trade surplus issue.

In the final analysis, China's trade surplus is determined by the division of labor in today's globalized world.

The trend of multinationals transferring their production to China and changing most of the world's imports and exports into intra-company transfers is irreversible.

At the same time, we can see that foreign investments in new and high-tech industries keep growing, indicating this round of industry transfer has not ended and a new global economic structure will continue to evolve.

Hence he believes that the resolution of this issue cannot merely depend on the Chinese government's macro-control policies.

If it is indeed necessary for the RMB to appreciate, China can raise the magnitude of the RMB's fluctuation. As the exchange rate is essentially one lever of market control, it will do no harm for RMB to revaluate, said Zhang.