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Q: It has been reported that the increase in Chinese foreign trade has contributed greatly to world merchandize trade. What are reasons for such a rapid increase in foreign trade? What has foreign trade contributed to Chinese economic development?

A: According to statistics provided by the Ministry of Commerce, in 2004, the total value of imports and exports reached US$1,154.8 billion, an increase of 35.7 percent over the previous year. China ranked third in world trade in 2004 instead of sixth in 2001. In terms of development speed, between 1978 and 2004, the world trade volume rose 6.4 times with an annual increase of 6.6 percent; that of China increased 56 times with an annual increase of 16.8 percent. These statistics show that China made the largest contribution to the world trade increase. The 2004 Report on World Investment, delivered by the United Nations Conference on Trade and Development, says that China and the United States have become the two great engines for world economic growth.

The rapid increase of Chinese foreign trade owes to a swift development of national economy, the recovery of the world economy and the improvement of the global environment. In addition, there are five main reasons as follows:

Firstly, reform of the foreign trade system has constantly deepened. The operation entities have been diversified and the enterprises' competitiveness has improved. All these have given impetus to the development of foreign trade.

Secondly, the composition of import and export products has been optimized. High value-added and high-tech products have become a new growth point of foreign trade.

Thirdly, China has actively accepted transfer of international industries and expanded the use of foreign investment. As a result, investment and trade has promoted each other. More than 60 percent of the increased volume of imports and exports is achieved by foreign-invested companies and through processing trade.

Fourthly, the rapid development of the Chinese national economy has expanded the demand for imported production materials such as energy resources, raw materials and key equipment.

Fifthly, the positive effect of China's entry into the WTO has gradually emerged. Foreign trade laws and regulations, as well as relevant policies and systems, have been updated steadily. The internal and external environment of China's foreign trade has been further improved.

Increasing foreign trade, investment and consumption have become major factors behind China's economic growth. In 2004, the value of exports accounted for more than 30 percent of the GDP, contributing 2 percentage points to economic growth. Tax income from import and export made up some 18 percent of the total tax revenue; tax income from foreign companies accounted for more than 20 percent of the total. The number of people directly involved in foreign trade surpassed 80 million.

The rapid increase of China's foreign trade has not only greatly accelerated the economic restructure and the upgrade of technology and industries. It also has been conducive to the import destination countries of Chinese products and their economic stability, as the Chinese goods are of good quality and low price. Some countries have even walked out of the shadows of economic stagnation because of Chinese exports.

At present, the Chinese economy is developing soundly. Macro control has achieved positive results and will provide favorable conditions for the development of foreign trade. But some uncertainties, such as the high price of international oil, ever-increasing trade protection measures, and the fluctuation of major currencies are imposing great challenges and difficulties on further development of Chinese foreign trade.