Written by Frank Li
Hello from China!
In a previous post (The People’s Republic of China at Age 65), I highlighted five mega domestic infrastructure projects in China. In this post, I will highlight China’s global trade.
China is by far the largest exporter in the world, as well as the largest importer soon, if not already. Generally speaking, China imports natural resources (e.g. oil and coal) and exports products from shoes to communications equipment.
Here is a big picture of China’s global trade:
Next, I will break it down into regions, one by one.
1. China and the U.S.
2. China and the EU
3. China and South America
4. China and Africa
5. China and Asia-Oceania
6. Discussion
One chart is worth a thousand words. With five charts above, hopefully you have obtained a good idea about China’s global trade. Together, these charts show a remarkable achievement by China over the past two decades.
How could China have achieved so much success in two short decades? Great leadership at the top and hard-work at all levels!
In contrast, the U.S. now has trade deficits with more than 90 countries. We are fortunate to have been able to continue spending beyond our means, thanks to the strong U.S. Dollar! As China’s RMB becomes an alternative to the U.S. Dollar as the world’s major reserve currency, we will no longer be able to painlessly print money to buy goods, as we have been doing over the past four decades, especially with the petro dollar. Therefore, the U.S. will have to face the consequences of decades of out-of-control overspending: high inflation and the diminishing value of the U.S. Dollar! They American way of life will be forever changed, for the worse, much worse!
Two diagrams below highlight our trade problems – We have been vastly outspending our income for decades!
What a stark contrast between the U.S. and China! The former has been declining sharply, while the latter has been rising rapidly!
Here is a critical question for many Americans: Is China’s “challenge” to the U.S. yet another fake like the last one posed by Japan in the 1980s?
The answer is no! Following my reasoning … Conceptually, the Chinese expansion model so far is similar to the Japanese expansion model that peaked in the 1980s. Practically, here are two key differences between them:
Scale: China is a much bigger country, with a much bigger capacity to trade massively than Japan ever did. So expect the continued expansion of China’s global trade.
Creativity: The Chinese are, generally speaking, more entrepreneurial than the Japanese, largely because of the key difference in their cultures: China has an “emperor” culture, in which many strive to be a king (Human History: China vs. Japan). In contrast, the Japanese have been subservient to the same emperor family for more than 2,000 years. So expect China to go way beyond trade into more and more international projects, which is the subject of my next post.
7. Closing
Trade or war? China is focused on trade, while the U.S. is focused on war. That is a key difference between the two countries today!
