China has overtaken the United States of America as the world’s largest trading economy. This is the first time in over sixty years that a country other than the US has held the title, which is measured by the total of imports and exports each year. The US Commerce Department has revealed that China traded $3.87 trillion USD in 2012, compared to the US whose import and export goods narrowly missed the mark, coming to the sum of $3.82 trillion.
After seven consecutive quarters in decline, China became something of a comeback kid in Q4 2012, showing remarkable growth in stark contrast to the US, which has struggled in a post-financial crisis environment. Andrey Shank, an economist at Investcafe, posits that “the main reason for this growth is the Chinese governmental policy directed at stimulating domestic demand, which improves imports to growth.”
A considerable portion of Chinese trade concerns the import of raw materials and parts which require assembling into finished products and re-exporting, a process which adds “only modest value” according to Eswar Prasad, a former International Monetary Fund official who spoke to Bloomberg.
Thanks to its proposition of cheap labour and inexpensive production to the rest of the world, China has become the global leader in a diverse and somewhat bizarre range of industries. For example, China is responsible for over 70% of the world’s mobile phone market. To put it another way; China manufactures ten times as many mobile phones per person as the rest of the world.
China also produces nearly six times more pork per person than any other country, eleven times more solar power cells, seventeen times more air conditioner units, six times more cement, and seven times more pairs of shoes. It’s safe to say, then, that China has pretty much all its bases covered.
Speaking to Bloomberg, Jim O’Neill, Chairman of Asset Management at Goldman Sachs, stated: “For so many countries around the world, China is rapidly becoming the most important bilateral trade partner.” He also warned that such a surge in trading activity could have the potential to “disrupt regional trading blocs… Germany may export twice as much to China by the end of the decade as it does to France.”
The US still dominates as the world’s largest economy, but an ageing population and rising labour costs may soon see China transform into a more consumptively driven nation. A report by Pricewaterhouse Coopers released on Sunday 10th February indicated that China could surpass the US as the leading global economy by 2017.