Many people start the new year by resolving to change their old ways. Not China.
On Dec. 27 Zhong Shan, the country's vice minister of trade, declared China will continue to increase its share of world exports. Figures due out this week are expected to show that China's exports in December were higher than a year ago, after 13 months of year-on-year declines. China's exports fell by around 17 percent in 2009 as a whole, but other countries' slumped even more. As a result China overtook Germany to become the world's largest exporter and its share of world exports jumped to almost 10 percent, up from 3 percent in 1999.
China takes an even bigger slice of the U.S. market. In the first 10 months of 2009, the United States imported 15 percent less from China than in the same period of 2008, but its imports from the rest of the world fell by 33 percent, lifting China's market share to a record 19 percent. So although the U.S. trade deficit with China narrowed, China now accounts for almost half of America's total trade deficit, up from less than one-third in 2008.
Trade frictions with the rest of the world are heating up. On Dec. 30, the U.S. International Trade Commission approved new tariffs on imports of Chinese steel pipes, which it ruled were unfairly subsidized. That month, European Union governments voted to extend anti-dumping duties on shoes imported from China.
Foreigners insist the main reason for China's growing market share is that the government in Beijing has kept its currency weak. But there are several other reasons why China's exports held up better than those of its competitors during the global recession. Lower incomes encouraged consumers to trade down to cheaper goods, and the elimination of global textile quotas in January 2009 allowed China to increase its slice of that market.
China's exports are likely to grow more slowly over the next decade, as demand in rich economies remains subdued, but its market share will probably continue to creep up. Projections in the International Monetary Fund's World Economic Outlook imply that China's exports will account for 12 percent of world trade by 2014.
Its 10 percent slice this year will equal that achieved by Japan at its peak in 1986, but Japan's share has since fallen back to less than 5 percent. Its exporters were badly hurt by the sharp rise in the yen -- by more than 100 percent against the dollar between 1985 and 1988 -- and many moved their factories abroad, some of them to China. The combined export-market share of the four Asian tigers (Hong Kong, Singapore, South Korea and Taiwan) also peaked at 10 percent before slipping back.
An IMF working paper published in 2009 calculated that if China remained as dependent on exports as in recent years, then to sustain annual GDP growth of 8 percent its share of world exports would rise to about 17 percent by 2020. To consider whether that was feasible, the authors analyzed the global absorption capacity of three export industries -- steel, shipbuilding and machinery. They concluded that to achieve the required export growth, China would have to reduce prices, which would be increasingly hard to manage, whether through productivity gains or a squeeze in profits. In many export industries margins are already wafer-thin.
