As China's economy continues to rise, its tradition trading partners are falling fast behind. Europe can no longer say for sure whether it reaps benefits from China's growth as its exports to China are slowly staggered, weakened and substituted. China consumed 5% less imports from Europe than a year earlier, a sign that the world economy is becoming less of China than China of it, as this was the largest drop in imports to China from Europe since 1998. For Japan and US, exports to China are still on the rise, but shadowed by a slowdown.
Simultaneously, exports from world economies to China ex-Europe, Japan and US are rising rapidly, almost as rapidly as China's economy, with imports from all these other countries taking a 65+ percent share of all imports into China. This effect appears to be the product of China's hunger for raw materials and commodities, such as oil and metal, which can often be obtained from developing economies at a lower price and be manufactured within China as a substitute for European/Japanese/American goods at a cheaper price.
However, as China's exports rises, it faces another problem: the declining trade deficit and slowdown of the US economy, the largest economy in the world, which could have devastating effects on the Chinese economy. The Chinese central bank, People's Bank of China, issued an article that estimated that for every 1% decline in US GDP, a 6% decline in Chinese export growth will result. As I've constantly mentioned in previous posts, China is a heavily export orientated economy and relies on its ability to improve on its trade surplus year-on-year to sustain its current growth rate. China does not have the same consumer market as the US does.
Therefore, is the US slows down, one might be expecting an increase of at least one of two things: Chinese government debt (from continued infrastructure investment) and/or business inventory (from few exports overseas). Then maybe China will have to turn to its traditional trading partners once again for help?
Comment Preview