January 25, 2014, by Tony Hong
Another economic milestone but does it actually mean anything?
By Dr. David O’Brien,
Assistant Professor, School of Contemporary Chinese Studies at the University of Nottingham Ningbo China.
In a matter of weeks China is very likely to surpass the United States and officially become the world’s leading trading nation.
According to official figures the value of China’s imports and exports in 2013 reached $4.16 trillion. The American figures will not be released until next month but there is strong speculation that we are about to witness a seismic shift and China will roar into first place.
As U.S. goods traded from January to November 2013 amounted to just $3.57 trillion, there is little likelihood it will be higher than China’s.
Zheng Yuesheng, a spokesman for China’s customs administration, said: “It is very likely that China overtook the US to become the world’s largest trading country in goods in 2013 for the first time. This is a landmark milestone for our nation’s foreign trade development”.
China had already become the world’s largest exporter of goods in 2009.
Yet the news comes against the backdrop of other figures which show that Chinese GDP actually slumped to a 14-year low in 2013, although it still grew at a steady 7.7 per cent.
While the Chinese government want to turn their economy from investment dependant, to one powered by domestic demand, the latest figures from the National Bureau of Statistics show that China’s 56.9 trillion yuan ($9.4 trillion) economy is still very much relying on investment for growth.
Capital formation accounted for 54 per cent of China’s economic growth in 2013, exceeding the 50 per cent share taken up by consumption.
While the news that China may be about to regain the position of world’s leading trading nation for the first time since the mid Qing dynasty, there are growing indications that the Middle Country is still quite some way from succeeding the US as the world’s overall largest economy.
According to the economic consultancy Cebr’s World Economic League Table (WELT), China’s GDP will overtake the US only in 2028 to become the world’s largest economy – much later than some analysts have suggested.
This reflects the continuing recovery of American and European economies and the slowing down of the Chinese economy.
As political and economic big wigs gather for their annual shindig in the luxury Swiss sky resort of Davos, confidence that the corner has been turned is growing.
In a survey of world corporate leaders carried out by accounting and consulting firm PricewaterhouseCoopers, the majority said they were “gradually switching from survival mode to growth mode,” while those forecasting a recovery in the world economy jumped to 44 per cent.
In the survey of 1,344 chief executives, only 7 per cent of corporate bosses thought a recession was looming in 2014, a significant plunge from the 28 per cent expecting a contraction last year.
But is there really any great difference between being first and second?
Absolutely there is!
Throughout the 64 year history of the PRC so much of the political discourse has been about ‘catching up’ with western countries in almost every economic way possible, from steel production to construction to trade.
For America, to lose the position as world’s largest economy will also have implications for a country which until very recently took enormous pride in the being the world’s only superpower.
China now stands on the brink of not just catching up but taking over. This will be of huge psychological importance in both the US and China and it remains to be seen how each country will adjust to a new balance of power. Further economic milestones are on the way.