Who’s the trade leader?

Date posted: May 10, 2013

When we think of world trade today most of us think of China. China has built its country in the last two decades around exports.  So, is China really the trade superpower? N.C. State University economist Mike Walden answers.

“Well, it has been the trade superpower, and I don’t want to minimize the fact that an enormous economic change is happening in China.

“China essentially has been taken from a peasant economy 30 years ago to obviously a first class world economy today. And a lot of this the Chinese did by focusing on exports, selling more, if you will, than they imported.

“And five years ago China led the world in terms of the surplus of exports over imports. Today though, that’s no longer the case. China’s surplus of exports over imports has slipped. In fact it’s been cut by 50 percent over the last five years.

“The leader now is Germany.  Germany is really the country that now focuses on exports in order to build up its economy. And I think a couple of things have happened to China.

“First of all, it’s no longer been able to maintain its status as the low-cost country in the world. Its costs are rising. Its labor costs are rising. That’s making its exports not as competitive. And secondly, the Chinese people themselves  are turning to building up their own households. It is an internal consumption. They want those foreign-made goods. That’s had an impact on the trade surplus in China.  So China, indeed, still is a major world player, but its economy is dramatically changing.”

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