The Trading Power, Part I: A Decade of Fastest Development

The past 10 years marks a golden decade of development in China’s foreign trade.

Since the 16th CPC National Congress, the golden decade has witnessed China’s fastest growth in its trading history and the emergence of a new trading power.

An Electrifying Trading Power

“China has delivered an ‘A-plus performance’ since it joined the World Trade Organization (WTO) in 2001,” the WTO Director General Pascal Lamy remarked.

Having embraced the WTO rules, China has successfully integrated with the world and grown to become the world’s largest exporter and second largest importer.

Over the past decade, China has abolished, revised and adopted over 3,000 laws, regulations and department rules, fulfilled its commitments to the WTO in tariff and non-tariff areas, and eased its restrictions on foreign rivals to further open its markets to the world.

Currently, China’s overall tariff level is the lowest among all developing nations, and its average tariff level has been lowered from over 15 percent ten years ago to below 10 percent, according to China’s Ministry of Commerce.

The former U.S. trade representative Charlene Barshefsky once commented that China made the WTO a more complete system and became an important engine driving the global economic recovery.

“After joining the WTO 10 years ago, China has registered the fastest development since the founding of the People’s Republic of China,” said China’s ambassador to the WTO Yi Xiaozhun.

Both the nation’s import and export volumes have increased by nearly five-fold and achieved an average annual growth rate of above 20 percent during the past decade.

From 2002 to 2011, China’s total value of imports increased from $295 billion in 2002 to $1.8 trillion in 2011, an increase of about five times, realizing an average annual growth rate of 21.6 percent.

The country’s share in global total imports rose from only 4 percent in 2002 to nearly 10 percent in 2011, with its imports scale ascending from the sixth place in 2002 to the second in 2009.

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Since then, China has remained the world’s second largest importer, only next to the United States.

In terms of exports, China’s total export value grew about five times from $326 billion in 2002 to $1.9 trillion in 2011, with an average annual growth rate of above 20 percent. The country’s share in global total exports rose from only 5 percent in 2002 to 10 percent in 2011.

In global export rankings, China rose from the fourth place in 2002 to the No.1 spot in 2009, overtaking Germany as the world’s largest exporter, and has maintained that position ever since.

With China’s total trade volume growing to become the second largest in the world and its current share of global trade accounting for the largest at 10.6 percent, a new trading power has emerged.

The Fiction behind Friction

For the past decade, the electrifying trading power has driven China’s economic engine forward at a miraculous speed, but has also sent the rising economic powerhouse suffering increasing trade frictions.

China accounted for around 10 percent of the global exports, yet one-third of the world’s anti-dumping investigations and half of the anti-subsidy investigations are against China. In fact, China has suffered more trade frictions than any other country in the world over the last 10 years.

Some major economies used to accuse China of giving unfair support to traditional exports, but in recent years, they launched a slew of trade investigations targeting China’s emerging and high-end products.

The United State, China’s second-largest trading partner, brought an increasing number of anti-dumping and anti-subsidy cases against China, including those concerning China’s automobile tires in 2009, photovoltaic products late in 2011 and Chinese cars and auto parts in September 2012; while the European Union, China’s largest trading partner, filed an anti-dumping investigation into Chinese photovoltaic products at the same time in September.

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Moreover, in February, the United State launched the Interagency Trade Enforcement Center (ITEC), aiming to strengthen its efforts to investigate what it called “unfair trade practices” from its major trading partners.

“The establishment of the ITEC is a sign of rising trade protectionism,” Shi Mingshen, one of China’s most influential business commentators, said to this journalist. “Actually, China’s major trading partners including the United States have been benefiting from China during the past 10 years, enjoying low inflation and high industrial competitiveness.”

Experts believe that the reasons for the increased trade protection measures against China are the sluggish global economic environment and the high unemployment rate in some of China’s major export destinations as well as the rising Asian power’s comparative edges in manufacturing.

The unemployment rate in the eurozone hit a 10-year high in May 2009 of 9.5 percent, and by September 2012, it had reached as high as 15 percent in five of the EU members.

The rate in the United States, from December 2008 to February 2012, was averaged above 7 percent amid its sluggish economic conditions caused by the global financial crisis.

Of all the trade frictions China has suffered during the last decade, the conflicts with the United States were the most major ones.

“US trade protection measures against China will not decline due to the sluggish US economy and China’s huge trade surplus with the No.1 superpower,” Ms. Shi said.

China’s trade surplus with the US has often been used by the protectionist as an easy excuse to bash China and build trade barriers against the country.

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However, it is a consensus among Chinese experts that the main cause of the US trade deficit with China has been the Asian economic power’s comparative advantages in manufacturing.

China’s abundant human resources have made the world’s most populous country hold the incomparable edges in low-end manufacturing. And although the cost of labor in China has been growing in recent years, it is still relatively low, especially when compared with the high cost of labor in the United States.

“As long as the rule of free trade is followed, China’s trade surplus with the US will not be eased to a large extent in the not-too-distant future,” said Ms. Shi.

“However, the current trade tension between China and the U.S. may be alleviated next year by the time the election is over and the US economy further recovers. In the meantime, China is moving towards a more consumption-oriented economy from the export-driven growth model. After all, it is clear that trade between the two highly-complementary markets is greatly beneficial to both of the economic powers.”

“China and the U.S. have more common interests than differences in foreign trade,” said Ms. Shi.

Over the past golden decade, China has been seeking common interests with its trading partners during competition, friction and cooperation.

“China is not the only beneficiary for its entry into the WTO, the advanced countries, emerging economies and even some of the least developed countries in Africa also benefited from it,” said Kandeh Yumkella, Director-General of the United Nations Industrial Development Organization (UNIDO).

Author: Li Zhenyu
Source: People’s Daily Online

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