China still faces serious problems posed by an imbalance in international payments despite its efforts to reform the forex management system in the first half of the year.

It remains a heavy and hard task to reach international balance of payments, said Hu Xiaolian, director of the State Administration of Foreign Exchange (SAFE), at a recent symposium.

Last year the surplus in China's balance of international payments was 223.8 billion U.S. dollars. In 2004 it was 110 billion.

Statistics with the SAFE show that China posted an increase of 76.3 percent in its contracted overseas direct investment funds in the first half year.

China continued to support its businesses to orderly broaden capital outflow channels, said Hu.

The government has abolished the purchase quota of foreign exchange in overseas direct investment to encourage more outflow of capital.

Hu attributed the surplus to the rapid grow of its open economy, but said that it also reflected problems in China's economy.

To reach a balance of international payments would require change to the mode of economic growth, adjustment of the economic structure and increasing domestic demand, said Hu, adding this will be a long and gradual process.

The official asked concerned departments to tighten supervision over cross regional capital flows, especially those in short terms. Meanwhile, the reform of the forex management system should be deepened to allow conversion of the Renminbi in capital accounts.

Editor: Donald