Trade Partners: Figures about
China’s Commercial Relationships

Only a few decades ago, China was not a major trading partner. The United States, on the other hand, has been the big player with many other nations seeking to trade with for many years, partly due to the strong economy and international footing.

At the turn of the millennium, only five countries saw China as their main trading partner; however, less than two decades later, 43 countries see themselves as China’s trading partners now. The consistent advancement of China’s trade market is obvious, especially when compared to the US where a fall from 53 to 31 countries considering them as the top partner has been seen in the same time period. Analogously, the integration of China into international trade can also be seen with respect to its trade agreements.

 

The US as trade partner of China is a historically interesting connection, Mao versus Washington. Particularly for the US and China, trade implies geopolitical aspects.

 

Imports and Exports

When considering the context of China’s trading partners, the biggest contribution is through China’s exports to the world. The trade value is determined by the total amount of imports and exports combined in regards to another nation. For China, exports are larger than imports for most nations they trade with and consequently they notoriously have a trade surplus. For more information on this discrepancy, read the balance of trade article here.

However, this trend is changing, the export market is slowing down, and the switch over to a more consumption based economy is expected to increase the relative level of imports with respect to China’s trade value.

 

Current Top Trade Partners of China

The following is a list of largest trading partners of China in terms of volume with China in 2014. The figures are excluding foreign direct investment, and only focus on the trade of goods and services.

  1. United States: $532bn trade value
  2. Japan: $312.55bn trade value
  3. South Korea: $272.24 trade value
  4. Taiwan: $197.28 trade value
  5. Germany: $161.56bn trade value

 

Difficulties for China

Fears are consistently being expressed concerning the future of China’s economic growth. Many experts believe that the unprecedented growth seen by China over the last decade is starting to come to an end. The question arises of not if, but when, China’s growth rates (also with respect to the overall trade value) will decrease.

This may affect China’s position of being a top trade partner internationally. Factors such as rapid wage growth, excess production capacity, and a reducing investment as a proportion of the nation’s GDP could result in a slowdown in the export market. This could in turn trickle down to less imports since the people working in export oriented industries would consume less also with respect to imported goods and services.

Furthermore, one of the reasons for the slowdown that China is currently facing is directly related to the integration of China into the world economy. As the nation is growing much faster than China’s trading partners (as shown previously), their export orientation is slowing down their growth once these markets are saturated.

The country will need to find other suitable trading partners if they are to keep the trade balance growth with the export orientation at the current rate.

Additionally, with threats of other developing nations stealing market shares of labor intense manufacturing away from China, the country needs to readjust their own position on the value chain of production. With increased technology and specialization China should start to access markets with less intense wage pressure from other developing countries in the coming years. Otherwise they could lose already their only recently achieved success in international trade.

 

ASEAN country flags as trade partners of China The ASEAN countries will become more important as trade partners of China.

 

Outlook to the Future Trade Partners of China

The biggest challenges are being addressed by the Chinese government (debt and inflation), and it will be interesting to see both the development of China and China’s trading partners.

Developing East and South East Asian countries provide the most promise to China and will most likely play a key role over the coming decades. Trade with India is expected to play an integral role, as well. Currently the bilateral trade between the two nations is $100bn in 2015; however, by 2030 both countries are expected to be the world’s largest trading partners.

About the author

Jan has an intimate knowledge of strategic planning and operations management he acquired in the German military and in academia. Having graduated from Peking University, he possesses an acute knowledge of the Chinese economy. Jan routinely consults on short and medium term company strategy and is currently working on the company’s 3 year plan.

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