The 45.7% increase in Chinese exports in February 2010, highlights the steady improvement in global trade prospects fuelled primarily by the positive trends in Asia where trade has recovered faster than in the developed countries. The Chinese gains on the export front were matched by the growth in imports, which picked up by an equally impressive 44.7% in the most recent month. China?s trade performance in recent months has been boosted by its free trade agreement with Asean nations, which was operationalised at the start of the calendar year. Though the European Union and United States remain China?s two largest trade partners, it is its trade with the Asean countries which is now most buoyant. While trade with the EU rose by more than a third in the first two months of the calendar year, and by a quarter with the US, it shot up by around two thirds with the Asean countries. These gains have helped the Asean countries replace Japan as China?s third-largest trade partner in just two months.
This development is of significance to India as it is yet to be seen how India, which has entered into a similar agreement with Asean countries, will fare in competition to Chinese goods. Another positive trend that will give substantial relief to Chinese policymakers is the shrinking trade deficit.China?s monthly merchandise trade deficit which had shot up above $20 billion, has shrunk to single digits in the most recent month. This may have come just in time for China. After all, there is a continuing clamour for the revaluation of the renminbi which the US and other countries believe gives an unfair advantage to Chinese exporters. Though countries like India have also benefited from the global recovery?with export growth averaging 13% in the three months till January 2010?the large Chinese gains will push Indians further behind in the battle for global markets. Interestingly, seasonally adjusted figures show that other developing countries like Brazil and South Africa have done better than India with exports growth in December going up to 19.6% and 36.9% respectively. The only consolation is that we are still doing better than the OECD countries which lag even further behind with export growth edging up even more slowly from 5.9% in November to 10.7% in December. India may yet rue the fact that its trade linkages with the major Asian economies, particularly in Asean, are much weaker than China?s. That?s something we need to work on to reduce dependence on western markets.
