12 February 2013, 21:14

China - 2012 world’s biggest trading nation

China - 2012 world’s biggest trading nation

China surpassed the US becoming the world’s biggest trading nation last year as measured by the sum of exports and imports of goods, official figures from both countries show, Bloomberg reports. Earlier analysts expected that China would surpass the US as the world’s biggest nation only in 2016. Now they forecast that by 2016 China will become the world leader in terms of GDP.

According to Bloomberg, in January China’s customs administration reported that the country’s trade in goods in 2012 amounted to $3.87 trillion, surpassing the US by $100 billion. If China manages to maintain this growth rate it may become the world leader in terms of GDP volume by 2016. But it is necessary to take into account that the dynamics of the Chinese economy’s development depend on the demand on the global market. That is why China can become the world number 1 in terms of GDP volume only when the leading countries get over the economic crisis. We hear from Andrei Shenk, an analyst with the Investcafe.

"China will build up production and domestic consumption will grow. The population will be getting richer thanks to the growth of purchasing power. Thanks to the largest population China can increase its GDP by 9-10%. Ultimately it may lead to a situation where China will be the world’s GDP leader but it is difficult to say for sure whether it will happen in 2017 or not. In my opinion this is a quite optimistic forecast."

But according to a number of experts so far China will have to wait for its economic superiority. The reason for that is that the US dollar remains the main currency in gold and foreign currency reserves of many countries. To get rid of it immediately will be the same as to making several steps backward in economic development. Another important reason why China won’t be able to surpass the US in the near future is the economic policy of China. The rate of Yuan is still controlled by the Chinese government. We hear from independent economist Andrei Zaostrovtsev.

"If the currency is regulated by the government not by the situation on the market it cannot function as a global currency in economic relations. In order to make it a global currency it is necessary first of all to turn it into a market currency. If it happens the Yuan rate will double in comparison with its current rate and the competitiveness of Chinese goods will see a drastic decline."

To China this will mean nothing else but economic suicide because lease prices will soar. Higher wages will lead the higher production costs prompting foreign companies to leave China for Vietnam, Indonesia and Bangladesh because it is cheaper there. Dozens of millions of Chinese people will demand working places. The consequences of this step for the country will be catastrophic. Until official Beijing invents a new economic model, China will have to maintain its status of the global factory.

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