Today there was a news article in the paper, which quoted the Chinese commerce minister boasting about China overtaking Germany as the biggest exporter in the world. Latest available data do confirm that and this indeed is a great achievement. A closer look at the data reveals that China actually overtook Germany middle of last year (2008) and has been exporting consistently higher except for a single month in February 2009, a time when each country in the world was competing against each other on negative YoY export growth reeling from a slump in external demand. Infact China posted the 13th consecutive monthly negative YoY growth in exports last month. This year China is expected to end at a world export share of more than 10%, meaning that on a comparative scale the fall in China’s exports is far less than the others. The emergence of China as a global exporting goliath has been a much watched and anticipated phenomena and there have been wide criticism about the Yuan peg and how undervalued the currency is. However, I have a couple of questions corollary to this.
1) What about Imports? The answer is even more striking. China has surpassed Germany here too emerging as the 2nd highest importing country in the world, with a share of around 7.5%. This is still less than that of US, which accounts for more than 12% of what the world imports. But, while the difference in the import shares between China and US was 11.2pp during October 2005, it now stands at 2.7pp in July 2009. In the year 2009 alone, China’s share in world imports have multiplied from 5.5% in Jan 09 to 9.3% in July 09. All of a sudden, China is showing tremendous appetite in consuming world exports and is managing the slack in external demand, contributing significantly towards the developed country’s recent trade balance improvement. But Chinese imports too were falling for the past 12 months, but saw a huge jump in November (27.4%YoY), again meaning that on a comparative scale the fall in Chinese imports were much lesser than that of the world.
2) And then China’s trade balance? That is going to be tricky as both exports and imports have fallen commensurate to each other. The data too shows haphazard movement and the trend in unclear, though little bit skewed towards a fall in trade surplus.
But then the argument on the peg on Yuan probably is a little weaker now. So far the developed countries cried foul as cheap Chinese goods continued to flood their market but if China’s such appetite for imports continue to remain strong that would be in the favor of developed countries.
