China in global trade
Tuesday, 6 April 2010
Gousal Azam
The capitalist countries take policies to promote their interests. The socialist countries are no different. The seed of friendship between the USA and China sowed by Richard Nixon four decades back has grown into a big tree providing fruits for both. China considers Taiwan to be its integral part and opposes American arms supply to it. Even then America has been supplying arms to Taiwan. China could intervene. But it did not, considering the benefits the two sides get out of their bilateral trade. Trade with America and the rest of the world has turned China's economy into the world's second biggest. It made China America's second biggest lender as well.
China's pragmatism of non-interference into the affairs of others as well as friendship on equal footing earned it new friends in Asia, Europe, Africa and Latin America. Its dominance in the global market boosted its economy. No other nation could match China in this regard in recent decades. No other nation could match China in development efforts either. China now patrols the sea far beyond its coastal waters. It even challenged the US naval presence in the Western Pacific.
China's exports continue to swell defying the global economic ills. China retains a big chunk of the American market. But America's trade deficit with China reduced slightly in recent times. Even then, China accounts for almost half of the American trade deficit which was only a third in 2008.
Even after the abolition of quota system in textile sector in January, 2009, China's textile exports increased. China's share could reach a quarter of global oil trade in 10 years, exceeding 18 per cent of the US in the early 1950s. The US share has since dropped to 8 per cent. Common belief is that China's exports are likely to grow more slowly over the next decade. Projections made in the IMF's World Economic Outlook indicate that China's exports would account for 12 per cent of the global trade by 2014. China's 10 per cent share in world trade this year equals what Japan achieved at its peak in 1986. But Japan's share in global trade has fallen to less than 5 per cent. Japanese exports suffered most between 1985 and 1988 when the value of yen grew by more than 100 per cent against the dollar. As a result, many Japanese manufactures shifted their production facilities to China and other countries.
An IMF working paper published in 2009 indicates that to sustain its annual growth rate at 8 per cent of its GDP, China would be required to raise its exports to 17 per cent by 2020. For this China would have to reduce the prices of its exportables. Chinese exports would also depend heavily on the global steel, shipbuilding and machinery markets. And future export growth of China would depend more on computer chips and cars than on traditional products. Unlike Japan, China has the advantage of a stable exchange rate. But China could allow yuan to rise gradually at one time or another.
China's large population as well as territory provides it extra benefits, the other big exporting countries do not get. It means different levels of standard of living for China. When the Japanese economy moved into hightech productivity, high wages made them non-competitive. But China is likely to remain competitive for long. China's export dominance is growing fast. China is an example of how to stay away from the depressed world economy. But China claims that its merchandise exports fell from 36 per cent of GDP in 2007 to around 24 per cent around 2009. Its current account surplus has fallen from 11 per cent to an estimated 6 per cent of GDP. In other words, rather than being a drain on global demand China helped pull the world economy out of the crisis in 2009. Those who are envious of China's economic growth look at only one side of the coin, thinks China. Its imports were stronger than exports by 27 per cent up to November of the last year, when their exports were declining. America's exports to China, its 3rd largest export market, grow by 13 per cent in the year to October. During the same period its exports to Canada fell by 14 per cent. IMF expects China's exports to grow this year if it does not revalue the yuan.
According to western media, China is doing more to rebalance the global economy than America, by spending more while America saves more. As a matter of fact, China's domestic sale of automobiles and consumer durables and health care spending increased while in America they fell.
The writer is ex-Secretary
General, IBB
The capitalist countries take policies to promote their interests. The socialist countries are no different. The seed of friendship between the USA and China sowed by Richard Nixon four decades back has grown into a big tree providing fruits for both. China considers Taiwan to be its integral part and opposes American arms supply to it. Even then America has been supplying arms to Taiwan. China could intervene. But it did not, considering the benefits the two sides get out of their bilateral trade. Trade with America and the rest of the world has turned China's economy into the world's second biggest. It made China America's second biggest lender as well.
China's pragmatism of non-interference into the affairs of others as well as friendship on equal footing earned it new friends in Asia, Europe, Africa and Latin America. Its dominance in the global market boosted its economy. No other nation could match China in this regard in recent decades. No other nation could match China in development efforts either. China now patrols the sea far beyond its coastal waters. It even challenged the US naval presence in the Western Pacific.
China's exports continue to swell defying the global economic ills. China retains a big chunk of the American market. But America's trade deficit with China reduced slightly in recent times. Even then, China accounts for almost half of the American trade deficit which was only a third in 2008.
Even after the abolition of quota system in textile sector in January, 2009, China's textile exports increased. China's share could reach a quarter of global oil trade in 10 years, exceeding 18 per cent of the US in the early 1950s. The US share has since dropped to 8 per cent. Common belief is that China's exports are likely to grow more slowly over the next decade. Projections made in the IMF's World Economic Outlook indicate that China's exports would account for 12 per cent of the global trade by 2014. China's 10 per cent share in world trade this year equals what Japan achieved at its peak in 1986. But Japan's share in global trade has fallen to less than 5 per cent. Japanese exports suffered most between 1985 and 1988 when the value of yen grew by more than 100 per cent against the dollar. As a result, many Japanese manufactures shifted their production facilities to China and other countries.
An IMF working paper published in 2009 indicates that to sustain its annual growth rate at 8 per cent of its GDP, China would be required to raise its exports to 17 per cent by 2020. For this China would have to reduce the prices of its exportables. Chinese exports would also depend heavily on the global steel, shipbuilding and machinery markets. And future export growth of China would depend more on computer chips and cars than on traditional products. Unlike Japan, China has the advantage of a stable exchange rate. But China could allow yuan to rise gradually at one time or another.
China's large population as well as territory provides it extra benefits, the other big exporting countries do not get. It means different levels of standard of living for China. When the Japanese economy moved into hightech productivity, high wages made them non-competitive. But China is likely to remain competitive for long. China's export dominance is growing fast. China is an example of how to stay away from the depressed world economy. But China claims that its merchandise exports fell from 36 per cent of GDP in 2007 to around 24 per cent around 2009. Its current account surplus has fallen from 11 per cent to an estimated 6 per cent of GDP. In other words, rather than being a drain on global demand China helped pull the world economy out of the crisis in 2009. Those who are envious of China's economic growth look at only one side of the coin, thinks China. Its imports were stronger than exports by 27 per cent up to November of the last year, when their exports were declining. America's exports to China, its 3rd largest export market, grow by 13 per cent in the year to October. During the same period its exports to Canada fell by 14 per cent. IMF expects China's exports to grow this year if it does not revalue the yuan.
According to western media, China is doing more to rebalance the global economy than America, by spending more while America saves more. As a matter of fact, China's domestic sale of automobiles and consumer durables and health care spending increased while in America they fell.
The writer is ex-Secretary
General, IBB