According to official statistics released by China and the US, China surpassed the US in 2012 as the world's largest exporting and importing nation after it overcame Germany in 2009 as the world's largest exporter.
With the latest achievement, the country has reached another critical milestone in its rise to global economic power and influence.
A Bureau of Economic Analysis (BEA) report released by the US Department of Commerce on February 8, 2008, showed that US import and export of goods in 2012 amounted to $3.82 trillion. According to Bloomberg, a report released by China's customs administration in January showed that the country's total trading of goods, both import and export in 2012, amounted to $3.87 trillion.
Bloomberg News reports that Nicholas Lardy, a senior fellow at the Peterson Institute of International Economics in Washington, said: "It is remarkable that an economy that is only a fraction of the size of the U.S. economy has a larger trading volume." According to Bloomberg, Lardy said the increase in the volume of China's trade in goods was not due entirely to its undervalued currency which promotes exports due to cost advantage in the global market. To support his argument, he pointed out that China's imports have grown more rapidly than exports since 2007.
Global trade analysts note, however, that a significant part of China's imports represents raw materials imports and parts to be assembled into finished products or re-exportation.
According to the US Bureau of Economic Analysis (BEA), total US trade in 2012, when imported and exported services are taken into account along with goods, was $4.93 trillion. BEA reports that the US recorded a trade surplus of $195.3 billion in services last year, but posted a deficit in excess of $700 billion in goods. However, China posted a trade surplus of $231.1 billion in goods in the same period.
Global trade analysts note that US bilateral trade deficit with China remains a persistent cause of tension between both countries with US repeatedly accusing China of deliberately undervaluing the yen to gain an unfair advantage in international trade in goods.
However, according to Eswar Prasad, a former International Monetary Fund official, currently a professor at Cornell University in Ithaca, New York, "This trade imbalance is not representative of the amount of goods actually produced in China and exported to the U.S., but this perspective tends to get lost amidst the heated political rhetoric in the U.S."
What Prasad implies is that part of the trade imbalance may be due to Chinese "re-exports" that add on only very little value, apart from the pattern of falling export production and increasing consumption in the US economy.
But Jim O’Neill, chairman of Goldman Sachs’s asset management division, argues that the trade imbalance underscores the need to put pressure on the Chinese to play in the global economic, financial and trade system according rules of engagement established by the Western economic powers, a view the Chinese are unlikely to favor.
Bloomberg reports O'Neill said: "One way or another we have to get China more involved in the global organizations of today and the future despite some of their own reluctance. To not have China more symbolically and more importantly actually central to all these things is just increasingly silly."
China surpassed Germany, Europe's economic powerhouse, as the world’s biggest exporting nation in 2009. The U.S.on the other hand remained the world's biggest importer with an intake of goods worth $2.28 trillion, a symptom of the creeping transformation of the US in to a consuming rather than a producing economy. During the same period, China’s import of goods was $1.82 trillion.
However, according to figures from the World Bank, the US economy remains at least twice as large as China's in spite of the country's size and population. US gross domestic product (GDP) in 2011 was $15 trillion compared to China's GDP of $7.3 trillion. According to China’s National Bureau of Statistics January 18 report, the country’s nominal gross domestic product in 2012 was $8.3 trillion.
The larger volume of trade in goods by the Chinese economy in spite of lower GDP figures shows that the Chinese have focused on expanding international trade and foreign investment to boost economic growth at home. An increase in volume of trade in goods will tend to stimulate production at home as investors expand capacity to meet demand.
Analysts say China’s growing influence in the global marketplace could disrupt established regional trading blocs as more countries look to China for increased bilateral trade relations. Bloomberg reports, for instance, that Germany may export twice as much to China by the end of the decade as it does to France.
O'Neil said: "For so many countries around the world, China is becoming rapidly the most important bilateral trade partner. At this kind of pace by the end of the decade many European countries will be doing more individual trade with China than with bilateral partners in Europe."