Is China's trade surplus with the West a harbinger of bad things to come?

Discussion in 'China' started by JayATL, Nov 6, 2011.

  1. JayATL

    JayATL Senior Member Senior Member

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    You all have heard it from Chinese in many forums " yeah well we have more exports to the US, Europe and trade surplus vs. deficit - ha-ha we are getting more out of them "....

    I think this is more of bane than boom for them - every one of the countries in their top 10 trading partners (assuming they are the west) is actively working on building strategic / military/ security alliances against China. This has to be a concern, no? I mean if the economies (countries) you depend on are actually working against you - then it means / spells a harbinger of doom down the line...

    Also - guess what it means for India...?
    If you can show those countries that you can handle/provide the business infrastructure then they will switch to you in heart beat.... do you agree?

    Do you think this is why China is trying desperately to get out of being a " manufacturing based economy" ?
     
    Last edited: Nov 6, 2011
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  3. cir

    cir Senior Member Senior Member

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    south korea is a country that exports far more than it imports (to and from the western world)

    japan is another country that does the same but on an even larger scale.

    germany also exports more than it imports.

    so what are you suggesting.

    china is moving up the vaule chain. so it is inevitable that it relocates parts of her manufacturing prowess to less-developed countries, such as vietnam where there are tens of thousands of small and mid-sized chinese firms setting up shops.

    in 5-10 years, china's high valued-added products will dominate the world.

    what japan did in the last 20 years of the last century is trivial.

    watch this space!

    PS a so-called service-based and consumption led economy has no future.
     
  4. JayATL

    JayATL Senior Member Senior Member

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    did you read my post? I don't think you got it. Your economy is dependent on countries that are forming alliances against you and see you as a threat! how long can you depend on them? you had Japan state they want to move away from dependency on China to India ( as being no1 trading partner)

    Imagine if India's economy depended on Pakistan...
     
    Last edited: Nov 6, 2011
  5. cir

    cir Senior Member Senior Member

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    by the way, the west is up against china because it knows full well that china is the biggest threat to its dominace.

    india is no such threat. not because it is a democracy but because it poses no threat.

    at the end of the day, it is RACE that catogorizes.

    being an asian country, you will never be accepted a true member of the western club. never be considered one of its own CLASS.

    through hard struggle, you can either be the master or the slave.

    we chinese has decided to go for the former.

    india has yet to make up her mind.
     
  6. JayATL

    JayATL Senior Member Senior Member

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    but the west is your biggest benefactor- how did you decide not to go to former. Your biggest trading partners are the west...the evil west is buying more from you and supporting your economy!

    you have Btw- have not answered my question- how long can you depend on them? if your growth is measured by the business you do with the very countries who are planning to form alliances against you?
     
    Last edited: Nov 6, 2011
  7. cir

    cir Senior Member Senior Member

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    i read your post fine.

    trade surplus accounts for a tiny portion of China's GDP.

    for 2011, surplus will be about 2.5% of GDP.

    both japan and south korea have far higher a figure. so their economy is far more dependent on external trade than china is.

    remember, it is not the total two-trade volume but the SURPLUS that counts.
     
  8. cir

    cir Senior Member Senior Member

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    people seems to think that china only exports. no, china also imports, and on a large scale.

    the end result is that china's annual trade surplus, at some $150-200 billion, is only 2-2.5% of GDP which is expected to reach $7.5 trillion in 2011.

    this means that if china stops exporting, it will also stop importing, thereby having a big drag on the world economy.

    don't forget, china has a huge internal market, which it can fall back on when the external is in turmoil.

    all china needs to do is for the government to initiate and implement a few policies, such as those that were introduced in 2008 when the america-originated financial crisis hit the fan.

    china, being an autocracy, is able to turn on the tap, so to speak, any time it pleases and does it fast.

    the same can't be said about the west, or india for that matter.
     
  9. kickok1975

    kickok1975 Stars and Ambassadors Stars and Ambassadors

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    Your points sound like China is the only beneficiary of this trade whereas western countries are losers. What a biased conclusion! Western countries trade with China for their own benefit and interest, so does China. Nobody force you to trade, it’s your own choice. Besides, most western countries except US and Japan are not forming alliance to against China. Even US and Japan’s so called alliance to China is not like NATO against Soviet Union. They are trying to contain China’s rise, especially military, not destroy China’s economy which their companies benefit a lot. If US can find a better sourcing place and market than China, good for her. If not, face the reality and learn how to co-exist.
     
  10. JayATL

    JayATL Senior Member Senior Member

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    Okay explain this to me .... top 3 trade partners are US, europe and Japan right?

    how much to do you export to them

    How much do you import for them

    what goods do you import from them

    now - tell us has India reached that level of imports...from those 3? If not- ( which I know it has not), why would those countries not simply find what they lose in your imports within India's equally large market?

    I don't get how there is no concern that the biggest export markets could turn off the tap slowly on you... and go to india and you can't turn off imports at the same time. it's not like you tell them- you not buying us , we are not buying from you ( its private free market yeah?)
     
  11. JayATL

    JayATL Senior Member Senior Member

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    These countries are yet to relaize the indian market in terms of FTA like with china. thats a fact right? i.e they have another place to go, per say...?


    regarding japan - they already stated that they would like to make India no1 trade partner vs China to get off that dependency on china in under 4 years. then you might know about the huge industrial corridor project already signed?

    besides Us and japan who are forming alliances- australia, Vietnam, S. korea, philipines and those pesky others folks you guys dont like in south china sea...
     
    Last edited: Nov 6, 2011
  12. agentperry

    agentperry Senior Member Senior Member

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    the problem with west is that the moral of the big cos is down and the only hope they are having is the consumption in brics or basic. the mnc concept took away the concept of nationality and loyalty with the homeland, these corporates are citizens of banks and usa, france etc. yes i agree with jayatl that if better infra is there even in somalia then they will move out but i would like to add that if consumption in usa will drop and might of usa drops then they will moveout of usa too. world is after all a global village.
     
  13. Tshering22

    Tshering22 Sikkimese Saber Senior Member

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    I agree with this part big time. The problem is until we are ruled in the current kleptocratic system, we cannot come out successfully. Democracy is a wrong word for our form of rule right now. Almost all the 483 odd politicians that rule our country are involved in some or the other scam. Except a number countable on fingers, remaining are all enemy supporting traitors including our actual PM-for-now Sonia Gandhi. Most see MMS as the PM but he's just a public figure.

    Industrial policies regarding infrastructure is pathetic. Continuing on stupid "Plans", these plans never are fructified. We're building infrastructure that we were supposed to have 6 years ago, right now. Which means instead of building for the future, our pace is so pathetic that we're building for past. To change this, we will need a radical new transformational government that has the power and will to rapidly mobilize resources. The western demand unfortunately is nothing less than the present form of democracy, which they don't understand that 1.2 billion people cannot be managed well without a POSITIVE semi-authoritarian touch.

    We seriously need China-like infrastructure. And it has to start with changing the political system. Either some group should come and systematically replace the current kleptocracy, or someone noble and patriotic comes and replaces this regime with Force (like Mustafa Kemal of Turkey).

    China can never do that. Simply because they would have to mould all their rules and regulations in favor of European countries and very similar to them. In our case, we continued having those since the beginning so West finds it easier however, China traditionally moved against them due to Communist mindset. So they will NEVER be able to come out of manufacturing economy.
     
  14. JayATL

    JayATL Senior Member Senior Member

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    here are some interesting facts I read to further illustrate the dependency of trade being a potetial bane down the road

    1. That exports have not only taken a hard hit because of global recession- but that consumer economy within china , which economist say as rule of thumb for any country has to be close to 50-60% of your gdp, has fallen to 35% !

    2. China exports is a whopping 25% of their GDP , which is a extermely high contributor/dependency.

    Article - china bubble | CanadianBusiness.com

     
    Last edited: Nov 7, 2011
  15. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Is China "desperately" trying to get away from it? They still manipulate their currency, rolling over bad debts and have excess capacity by the boat load. The factories on the coast that close move inland where wages are cheaper. The only thing that has changed is the reliance on fixed asset investment and land sales to prop up declining shares of exports. They aren't getting away from it, they have maxed out the export model. The service sector of China isn't going anywhere fast and actually decreasing as share of GDP thanks to their over reliance on construction. The private sector is taking a nose dive with no loans. They are going in the wrong direction.
     
  16. JayATL

    JayATL Senior Member Senior Member

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    Trouble brewing:

    Over the past year, a growing number of analysts and investors have argued all is not as it appears in the Middle Kingdom. What they see instead is a government desperately priming the pump to maintain an illusion of prosperity… As a share of the economy, household incomes have actually declined over the past decade. With the domestic economy too weak to maintain China’s high growth rates, and with exports to the West hurting, the Communist Party in Beijing and its regional offshoots have come to rely heavily on cheap exports and debt–fuelled investment to sustain China’s fragile fortunes. And the problems will only get worse as China’s massive population starts to age rapidly over the next decade…

    Massive stimulus:
    In a country that’s often been called the world’s factory floor, China’s Pearl River Delta is the industrial engine that keeps the assembly lines running. So, when America’s economy tanked in 2008, and western consumers stopped buying TVs and sneakers, the region was hit hard. Exports to the U.S. and the rest of the world plunged, and more than 100,000 factories shut their doors, throwing millions of Chinese labourers out of work. As protests broke out, officials worried the backlash could escalate…

    Faced with crisis, China’s leaders swung into action with a mammoth stimulus plan. In November 2008, Beijing unveiled a US$600–billion rescue effort that, relative to GDP, was several times larger than what America put in place. More important, the government ordered its state–run banks to crank up lending, especially to residential and commercial developers. The banks promptly obliged, shovelling more than US$1.5 trillion of loans out the door last year, an amount equal to 30% of the country’s economy. It worked better than the Chinese could have ever hoped — on paper at least…

    To provide readers with some context on the explosion of credit in China, consider the below chart from Societe Generale:



    Too little domestic consumption:
    The crisis and the government’s response exposed just how fragile China’s economy has become. The problem is simple — for all the hype around China’s emerging middle class, Chinese shoppers contribute very little to the country’s fortunes. In any economy, domestic consumption typically makes up roughly 55% to 65% of GDP. The remainder is typically split between exports and investment. Not so in China. Over the past decade, domestic consumption’s share of the economy has plunged from around half to a miniscule 35%, the lowest of any significant economy ever, according to Michael Pettis, a finance professor at Peking University…

    With almost nothing in the way of health insurance, welfare or a social safety net for retirement, Chinese feel pressure to save every penny they earn. At the same time, official policies that favour Chinese banks and exporters — namely artificially low interest rates, an undervalued yuan and cheap labour — come at the expense of household savers…

    The days of China being able to fall back on cheap exports is coming to an end, say experts. It’s not just that consumers in developed countries have retrenched, though that’s an immediate threat. China’s policy of devaluing its currency to grab export market share from the West is now squarely in the crosshairs of politicians in the U.S. and Europe…

    With the writing on the wall for China’s export machine, officials have to scramble for an alternative way to juice the economy. So China has increasingly looked to investments in infrastructure and construction to keep Chinese workers employed. In 2009, the peak of China’s stimulus campaign, fixed investments accounted for a whopping 95% of the country’s GDP growth. Even last year, despite all the efforts by Beijing to rein in its stimulus efforts, investment in fixed assets was the fastest–growing segment of the economy…

    Absolutely. The Chinese economy has become increasingly dependent on fixed asset investment
     
  17. JayATL

    JayATL Senior Member Senior Member

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    Massive over-building:
    “Crazy” fails to capture the utter insanity of what’s gone on in China’s property markets. In January, home prices in 70 Chinese cities jumped another 6.3% from the year before, and have more than tripled in the past five years. In prime markets like Beijing and Shanghai, prices have risen far faster. It’s no longer surprising to find taxi drivers and teachers who claim to own two or even three apartments each. At one point, Shanghai economist Andy Xie cited local media reports that some 65 million urban homes reported zero electricity consumption over a six–month period, suggesting there are enough vacant homes in China to house 200 million people. While power companies denied that was the case, in the regions around Shanghai, Beijing and other cities, fancy new apartment blocks stretch off into the horizon, their surfaces pocked with black holes where windows would otherwise be. Policy–makers have attempted to deflate prices. They’ve limited the number of homes Chinese can buy, restricted many state–run companies from buying up land, and ordered banks to rein in their lending, yet still prices continue to rise.

    It’s not just the residential sector. Commercial developers have engaged in their own orgy of debt–fuelled construction projects, bidding up land values threefold last year and erecting countless office towers, malls and hotels. It’s all adding to a glut of properties that are sitting vacant. In Beijing, where the official commercial vacancy rate is 30% but approaches 50% in many pockets, developers go to great lengths to make empty buildings look occupied, going so far as to paint silhouettes of office workers in stairwells…

    How could there be so many new buildings going up when, at the same time, so many others already sit empty? Simple. China is engaged in an elaborate shell game to hide a mountain of bad debts piling up on the balance sheets of its banks, developers and state–owned enterprises. In the case of real estate, it’s a matter of turning a blind eye to staggering losses… buildings sit half empty, yet landlords refuse to lower their rental rates. To do so would sink the value of the underlying land, which was used as collateral for the developer’s loans… This same scenario is playing out across the country on a massive scale…
     
  18. JayATL

    JayATL Senior Member Senior Member

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    Demographic time bomb:
    But above all, China faces a demographic time bomb that’s as bad, if not worse, as the one plaguing Europe. Largely as a result of the country’s one–child policy, instituted in the 1970s, China’s population is aging fast. The number of workers aged 20 to 29 will peak in about four years, then drop sharply over the next 15. At a point in the not distant future, China’s population will actually begin to shrink. All of those factors will curtail the number of people who are likely to move to cities and take up new jobs. “Their labour force is getting old and shrinking,” says [Vitaliy] Katsenelson. “I don’t think migration is going to be as big a force as people are expecting it to be.”

    As explained in an earlier post, the ageing of China’s population is likely to significantly curtail its growth potential. There is a good chance that China will grow old before it gets rich.

    What it means for commodity exporters:

    China is inextricably tied into the global economy. What happens there will have far reaching repercussions, especially in countries like Canada and Australia that have supplied China with the raw material to remake itself…

    By some estimates, demand from China is behind half the rise in global commodity prices, such as copper, oil, nickel, iron ore, coal and potash — all resources hauled from the Canadian [Australian] landscape. China has become Canada’s fastest–growing trading partner [and Australia's largest], and three–quarters of what we now sell to them comes from the ground [it's a similar story in Australia]. This dynamic shielded us from the brunt of the global recession. In 2009, Canada’s exports fell 28% from the year before because of the crisis in the U.S., yet at the same time our exports to China actually rose 7%.

    Some have argued the resource sector isn’t all that crucial to Canada’s well–being, since mining and oil and gas extraction directly account for just 4.5% of the economy. But this figure fails to capture the wider influence the commodity boom has had here…

    In plain terms, should China’s economic miracle turn out to be a mirage, all of that would be at risk. “If China fails, or even if this fixed investment model fails, countries like Australia and Canada are in deep trouble,” says John Lee, a foreign–policy expert at the Hudson Institute who is also a research fellow at the Centre for Independent Studies in Sydney, Australia. For one thing, commodity prices are likely to plunge…
     
  19. niceguy2011

    niceguy2011 Tihar Jail Banned

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    Yeah , China's trade surplus may not good for 99 % of people at western country (in the long run )but good for the 1% of them(those who r taking charge ).LOL

    So, we like to deal with western countries.LOL

    BTW, we like Indian market too.LOL
     
    Last edited: Nov 8, 2011
  20. JayATL

    JayATL Senior Member Senior Member

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    huh? did you read the premise of this thread?
     
  21. no smoking

    no smoking Senior Member Senior Member

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    There are 2 things missed in your analysis:
    1. China's dependance on international trading may be far less than you think. The truth is that china's exportation industries are more like an assembly line: importing key parts or resources from other countries and assemble them into final products exporting US, Europe. So you can find that china is having trading deficit with a lot of countries: Thailand, vietnam, Japan, korea, etc. If Europe and US decided to cut importation from china, not only china will be hit, there will be a lot other countries will be hit even harder. That is why after so many years of trade protection screaming, no significant thing happen yet.
    2. The true beneficiary of this so called chinese exportation surplus.
    Do you know that 60% of china's exportation coming from foreign owners?
    Do you know that those big companies of US, EU, Japan and Korea earns 9 times profits than what china got.
    After checking all these facts, you would understand why your anticipation now and other people's anticipation years ago has not turned true.
     

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