China has likely become the world’s largest trader. The rapidly awakening economic giant became the world’s largest exporter of goods back in 2009, but its relatively closed economy prevented imports from growing at the same rate. Economic reform has continued in China over the last few years, and imports have started to pick up significantly over the last few quarters as the growing Chinese middle and upper class are acquiring a taste for consumer goods. China’s announcement today that its total trade (imports and exports combined) topped $4.16 billion — making it the top global trader in 2013 — is yet another sign that the sleeping giant is not just awakening, but also beginning to flex its muscles.
The U.S. has not yet reported its final trade tallies for 2013, so we cannot yet say for sure that China has taken the world’s largest global trader title away from the U.S., but when you crunch the numbers, it seems extremely likely. U.S. trade came in at $3.57 trillion over the first 11 months of the year, so barring an all-time record for December trade, China will take over claim to the largest trading nation in the world.
Imports growing rapidly
China’s growing trade numbers are largely fueled by imports. The $4.16 trillion total trade figure for China includes $2.21 trillion in exports and $1.95 trillion in imports. Less than a decade ago total Chinese exports were two to three times imports. Today total Chinese exports and imports are almost equal.
Economic progress in China
China’s massive economy of today has its roots in economic reforms begun in 1978. The country established a number of “special economic zones” to produces good for export, but typically not for internal consumption.
China’s “open door” policy was firmly grounded in 1992 when Deng Xiaoping significantly expanded the special economic zone program. Exports grew at the rate of 17% a year for a decade, twice the rate of overall economic growth. China’s share of worldwide merchandise exports jumped from less than 3% to more than 10% in the span of a decade.
Dubious economic statistics?
A number of economists and financial analysts have expressed doubts about the accuracy of Chinese trade statistics. They say export figures are often bloated with faked invoices to disguise transactions and evade regulations. A recent Chinese government investigation into business fraud raised the possibility of fraudulent invoices inflating exports by $75 billion in the first quarter of 2013. That implies Chinese export figures could be off by as much as $300-350 million for 2013.