Trading China

Written by The Financial Express | Updated: Feb 12 2013, 09:23am hrs
Despite Chinas GDP being around half that of the US, the Asian giant has ousted the US to become the biggest trading country in the world, according to data from both the countries governments. In 2011, the World Bank pegged the US GDP at $15 trillion compared to Chinas $7.3 trillion. US exports and imports of goods last year amounted to $3.82 trillion, the US commerce department said, compared to the Chinese customs administration statement that Chinas trade in goods in 2012 totaled $3.87 trillion. While it would be easy to leap to the conclusion that an artificially controlled yuan boosted Chinas exports, this isnt entirely relevant. Chinese imports have grown more rapidly than exports since 2007. So whether or not the undervalued exchange rate boosted Chinas exports, a large part of Chinas trade involves the import of raw materials and parts that are used to assemble finished products that are then exported. Chinas imports surged 28% year on year to a total of $1.82 trillion.

Though HSBC last year forecast that China would overtake the US as the top trading nation by 2016 and China has already managed this feat, the difference between the quantum of the two countries trade is still small. And, with the US reporting a reduction in its trade deficit for the first time in three years, not to mention its economic recovery picking up steam, US trade could begin to accelerate again.