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Unit 2 Macro: Focus on China - Trade and Growth
27th January 2012
Export demand can be an important driver of growth and development. For many years China has practiced export-led growth with exports accounting for over 40% of GDP. China ran a trade surplus with the rest of the world of around of $200 billion in 2009 – this looks huge, but is fairly modest as a share of GDP. The surplus on the balance of payment current account has diminished from over 10% of GDP in 2007 to less than 6% in each of 2010 and 2011. But China still has a structural trade / BoP surplus.
China’s share of world trade in goods and services
Data from Timetric.
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China Shares in World Exports from Timetric
Chinese exports as a share of her GDP (%)
Data from Timetric.
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Exports of goods and services (% of GDP), China from Timetric
China Trade Balance in Goods and Services
Data from Timetric.
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China Goods and Services Trade Balance from Timetric
There has been a change in the pattern of trade since the global financial crisis – notably a big rise in imports of goods into China and a sizeable reduction in their trade surplus. This is an important development given trade tensions between China & the USA
Korea, Japan, Germany and Switzerland run trade surpluses with China because they are able to export the high-value manufactured items, particularly investment goods, China needs
The emphasis of China’s growth policy is changing; the government wants stronger domestic consumption of goods and services and an economy less reliant on global trends and external shocks (this is known as “de-coupling”). A quote from Premier Wen Jiabao - ‘China’s economy needs to be quickly put on the path of endogenous growth driven by innovation’
China is introducing supply-side economic reforms to encourage entrepreneurship
There have been some important changes in the priorities built into their 5 year economic plans (i.e. favoured and non-favoured industries when it comes to government financial support and a big focus on investment and innovation in green/cleaner energy industries as China seeks a shift towards sustainable growth.
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.