China's Role in the World Trade
Tuesday, 16 March 2010
Gousal Azam
Four decades ago the seed of friendship sowed by Henry Kissinger between America and China has now turned into a big tree with fruits for both. China considers Taiwan to be its integral part and opposes arms supply to it. Even then America has been supplying arms to Taiwan. China could stop it, but it did not, considering the long term benefit the country has been deriving out of the trade with America. China's economy has grown to such an extent that it is now the 2nd biggest loan giving country to America after Japan. Through the adoption of policies of non-interference with the affairs of others, China's call of friendship on equal footing attracted friends from Asia, Europe, Africa and Latin America.
Vastness of the market acquired by China not only strengthed its economy, but also extended the scope of developing and application of the most sophisticated technology with the prevalent technology of China. China has become the second largest exporting countries of the world after Germany.
The most notorious of all the depressions since 1929 is the current depression which occurred in Britain in 2007 and America in 2008 stirred almost all the world causing suffering extent of which varied from country to country. Even China could not manage an escape from the onslaught of the depression. Nonetheless, China's exports in December, 2009 increased from the exports of December, 2008 although its total export volume decreased by 17% in 2009. Rate of increase in exports of China in 1999 was 3%, share of world exports jumped to 10%. Even with this, China overtook the exports of world's greatest exporter, Germany. Inspite of the crisis, China has retained a big slice of American market. During the 1st 10 months of 1999, America imported 15% less from China compared with the exports in 2008. Whereas, US imports from the remaining world reduced by 33%. Retaining 19% of American exports, China is the biggest buyer of American goods. American's trade deficit with China reduced slightly in recent times.
Trade friction between America and the rest of the world is increasing. America imposed tariffs on imports of Chinese steel pipe in December, 2009 on the ground that they granted subsidies for this sector conspicuously in imbalanced proportion. For the same reason, European Union prolonged the time of imposition of tariffs on imports of Chinese shoes for another 15 months. With a view to retaining their most important position in world trade, China has kept is currency weaker. Its labour cost is lower in comparison with developed and some developing world. This has given it the added strength of retaining a big slice of world trade volume inspite of the crisis.
Common belief is that China's exports are likely to creep up more slowly over the next decade as demand in rich economics has been tamed to overcome the crisis. Projections as made in the IMF's World Economic Outlook indicate that China's exports would account for 12% of the world trade by 2014. China's 10% share of world trade this year is equal to the same as achieved by Japan at its peak in 1986. Japan's share in the world trade now has fallen to less than 5%.
The most remarkable difference of China with other big exporting countries is that China is a vast country for not only the size of population, but also of territory. Report has it that overseas hostility to China's export dominance is growing fast. Even Paul Krugman, the winner of the 2008 Nobel economics prize, wrote in his write-up, published in the New York Times that with a view to supporting exports China is holding down its currency. In other words, China drains away from the depressed world economy. He pleaded that the victim countries may be right to take protectionist action. China, on the other hand, claims that its merchandise exports have gone down from 36% of GDP in 2007 to around 24% around 2009. Current account surplus has fallen from 11% to an estimated 6% of GDP. In other words, rather than being a drain on global demand China helped pull the world economy along during the course of 2009. Those who are envious of China's much needed economic growth look at only one side of the coin in the thinking of China.
Western journal argues that China is doing more for global rebalancing than America. Rebalancing requires that China spends more and America saves more. As a matter of fact, China is doing more to boost domestic consumption through incentives to stimulate purchase of cars and consumer durables and increase health care spending than America is doing to enhance their savings. Continued augmentation of Chinese exports will attract more world attention resulting pressure on their yuan revaluation.
The writer is Columnist and ex-secretary general, IBB. He can be reached at e-mail: crdslbd@yahoo.com
Four decades ago the seed of friendship sowed by Henry Kissinger between America and China has now turned into a big tree with fruits for both. China considers Taiwan to be its integral part and opposes arms supply to it. Even then America has been supplying arms to Taiwan. China could stop it, but it did not, considering the long term benefit the country has been deriving out of the trade with America. China's economy has grown to such an extent that it is now the 2nd biggest loan giving country to America after Japan. Through the adoption of policies of non-interference with the affairs of others, China's call of friendship on equal footing attracted friends from Asia, Europe, Africa and Latin America.
Vastness of the market acquired by China not only strengthed its economy, but also extended the scope of developing and application of the most sophisticated technology with the prevalent technology of China. China has become the second largest exporting countries of the world after Germany.
The most notorious of all the depressions since 1929 is the current depression which occurred in Britain in 2007 and America in 2008 stirred almost all the world causing suffering extent of which varied from country to country. Even China could not manage an escape from the onslaught of the depression. Nonetheless, China's exports in December, 2009 increased from the exports of December, 2008 although its total export volume decreased by 17% in 2009. Rate of increase in exports of China in 1999 was 3%, share of world exports jumped to 10%. Even with this, China overtook the exports of world's greatest exporter, Germany. Inspite of the crisis, China has retained a big slice of American market. During the 1st 10 months of 1999, America imported 15% less from China compared with the exports in 2008. Whereas, US imports from the remaining world reduced by 33%. Retaining 19% of American exports, China is the biggest buyer of American goods. American's trade deficit with China reduced slightly in recent times.
Trade friction between America and the rest of the world is increasing. America imposed tariffs on imports of Chinese steel pipe in December, 2009 on the ground that they granted subsidies for this sector conspicuously in imbalanced proportion. For the same reason, European Union prolonged the time of imposition of tariffs on imports of Chinese shoes for another 15 months. With a view to retaining their most important position in world trade, China has kept is currency weaker. Its labour cost is lower in comparison with developed and some developing world. This has given it the added strength of retaining a big slice of world trade volume inspite of the crisis.
Common belief is that China's exports are likely to creep up more slowly over the next decade as demand in rich economics has been tamed to overcome the crisis. Projections as made in the IMF's World Economic Outlook indicate that China's exports would account for 12% of the world trade by 2014. China's 10% share of world trade this year is equal to the same as achieved by Japan at its peak in 1986. Japan's share in the world trade now has fallen to less than 5%.
The most remarkable difference of China with other big exporting countries is that China is a vast country for not only the size of population, but also of territory. Report has it that overseas hostility to China's export dominance is growing fast. Even Paul Krugman, the winner of the 2008 Nobel economics prize, wrote in his write-up, published in the New York Times that with a view to supporting exports China is holding down its currency. In other words, China drains away from the depressed world economy. He pleaded that the victim countries may be right to take protectionist action. China, on the other hand, claims that its merchandise exports have gone down from 36% of GDP in 2007 to around 24% around 2009. Current account surplus has fallen from 11% to an estimated 6% of GDP. In other words, rather than being a drain on global demand China helped pull the world economy along during the course of 2009. Those who are envious of China's much needed economic growth look at only one side of the coin in the thinking of China.
Western journal argues that China is doing more for global rebalancing than America. Rebalancing requires that China spends more and America saves more. As a matter of fact, China is doing more to boost domestic consumption through incentives to stimulate purchase of cars and consumer durables and increase health care spending than America is doing to enhance their savings. Continued augmentation of Chinese exports will attract more world attention resulting pressure on their yuan revaluation.
The writer is Columnist and ex-secretary general, IBB. He can be reached at e-mail: crdslbd@yahoo.com