The golden decade of China’s trade boom has brought tangible profits to various economies, making China a source of warmth during the severe financial winter.
The past decade saw China, the largest trading partner of Japan, South Korea, India and the Association of Southeast Asian Nations (ASEAN), become a booster of its neighboring countries’ economic development.
The past decade saw China, the world’s largest exporter and second largest importer that shared complementary strengths with the United States, European Union, and other major economies, become an important stabilizer of the global economy.
Booster of the Motor
The thriving Chinese economy has become the driving force for the economic development of Asia, the global economy’s main motor of growth.
With China being their largest trading partner, such major Asian economies as Japan, South Korea and India, including the ASEAN countries, have achieved rapid growth through trade with the world’s most populous nation.
Free trade area (FTA) plays a critical role in liberalizing trade. During the past decade, China has made considerable contributions to the establishment of free trade zones with its neighboring countries.
The launch of the China-ASEAN Free Trade Area, which comprises China, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, provides a glimpse of the economic and trade exchanges between China and other Asian countries.
Since the commencement of building one of the world’s largest FTAs – the China-ASEAN Free Trade Area 10 years ago, China’s average tariff for the ASEAN countries fell from 9.8 percent to 0.1 percent, with trade volume of the two regions almost reaching $363 billion in 2011.
ASEAN’s trade turnover with China has increased eight folds from $3.23 billion in 2000 to $28.4 billion in 2011, while China’s foreign direct investment (FDI) in ASEAN grew nearly 10 times from $0.62 billion in 2005 to $5.91 billion in 2011, despite the global financial crisis.
Meanwhile, China has overtaken the European Union and Japan to become the largest trading partner of ASEAN since 2009, while the ASEAN also became the third largest trading partner of China.
“On balance, China has acted as a booster of Asia’s economic development,” Mingshen Shi, one of China’s most influential business commentators, said to this journalist.
“The nation helped sustain a positive growth environment for Asia amid the global financial crisis and insulate it against the US and EU recession to the maximum extent possible.”
Stabilizer of Global Economy
China, the world’s largest exporter and second largest importer, has served as a major stabilizer of the global economy, with its rate of contribution to the world economic growth reaching 25 percent in 2010, based on the World Bank data.
China has become the world’s largest exporter since 2009, with its total export value increasing nearly five times from 2002 to 2011, accounting for 10 percent of the total global exports in 2011.
China’s growing exports has sent its trading partners growing.
According to statistics from the Netherlands, in 2007, Rotterdam became the first port city to break the threshold capacity of 400 million tons in Europe, with its capacity reaching 460 million tons, thanks largely to the local market’s huge demand for Chinese goods.
“When supply and demand are considered, ‘demand’ is not just what people want, but what people want and can afford to acquire. Chinese goods impart high value at low price,” John Duggan, a long-time China watcher and established American attorney, said to this journalist.
“All of a sudden, you realized that, oh, shoot, everything with good quality comes from China,” Evander Holyfield, an American celebrity who grew up surrounded by Chinese goods, said to this journalist. “People love to get thing from China, because it’s cheaper and with quality.”
China’s exported goods has brought substantial benefits to the world and improved the purchasing power of consumers in various countries.
According to China’s official statistics, imports from China had saved American consumers more than $600 billion from 2001 to 2010, which had helped boost economic growth and lower inflation in the United States.
China’s exported products also enable each European family to save €300 every year and help reduce the cost of raw materials for European manufacturing enterprises.
Based on a Morgan Stanley’s research report, in 2009 alone, approximately $100 billion in US consumer spending was saved by “Chinese imports”.
According to official statistics, from 2000 to 2011, China’s rate of contribution to the global exports growth was about 14 percent, 2.4 times higher than the 5.9 percent of the United States.
The large volume of China’s exports, in turn, triggered the dramatic increase of China’s imports. From 2002 to 2011, China’s imports realized an average annual increase of 21.6 percent and have ranked the second in the world since 2009.
The new trading power’s rate of contribution to the global imports growth reached 13 percent from 2000 to 2011, 1.5 times higher than the 8.6 percent of the United States.
With an average annual import of $750 billion, equivalent to creating about 14 million jobs for its trading partners, China’s huge, fast-expanding imports greatly facilitated the growth of global trade, especially after the 2008 financial crisis when China emerged as the major force in stimulating global economic growth and recovery.
Since the global financial crisis that first erupted in the United States, Europe has remained stuck in a severe debt crisis. During Chinese Premier Jiabao Wen’s visit to the debt-laden Europe in June 2011, China and Germany signed a raft of trade deals worth an estimated $15 billion. Premier Wen even proclaimed that China might increase support to Europe by buying the sovereign bonds of certain eurozone countries when necessary.
Moreover, the world’s most populous nation’s strong domestic demand and growing affluence makes the country a lucrative, even essential market for major economies.
When North America, the epicenter of the global financial crisis, was enveloped in the shadow of unemployment and bankruptcy in the 2010 Spring Festival, the historically largest Chinese tour groups came to New York and injected a breeze of fresh air into the stagnant financial centre. Over 1,000 Chinese mainland tourists bought a total of $30 million worth of Western luxury goods in that city.
To welcome the consumers from the rising Asian power, Cartier, one of the world’s top jewelers and luxury watchmakers, posted up in its New York stores the red Chinese blessing figures, while Macy’s, another renowned luxury brands, arranged a number of Chinese lion dances.
Chinese buyers were regarded as the stimulant to boost the local economy and a source of warmth during the severe financial winter.
“The growing Chinese consumption has made tangible contributions to the world economy and played an active role in stabilizing it,” said Ms. Shi.
“China is transforming its export-oriented growth model and turning itself into a consumption-oriented economy, which, in the post-crisis era, would have a positive spillover effect upon other global economies.”
Read on: Investing in China: Harvest Time
(This is a reprint from the People’s Daily Online of the Nov. 9, 2012 edition.)