Just three years ago, trade already represented 59% of world GDP, almost 1.5 times more than in 1980. During this period, international trade has been significantly transformed, not only in terms of volume and composition, but also in terms of the countries that the rest of the world leans on for its most important trade relationships. Now, a critical change is taking place in the picture, and you may be surprised to learn that China has already usurped the US as the world’s most dominant trading partner.
In fact, China has been the world’s largest exporter of goods since 2009. Official estimates suggest that the country’s total exports amounted to €2.5 trillion in 2019. In 2013, China became the world’s largest trading nation. larger of the world. But this was not always so. The United States previously held that position.
In fact, the title of the world’s largest exporter of goods has changed several times in the past and will probably change again. In the XIX century, Britain was known as the “workshop of the world” and ruled a global empire based on trade. Later, France and Germany also represented important positions. By the 21st century, China became “the factory of the world.” However, the Silk Road and the size of China’s economy suggest that it was often the largest exporter of goods in earlier centuries.
Over time, China’s dominance has grown dramatically. So it is not surprising that China and the US have a contentious business relationship, as both nations fight for the top spot. The Twitter user Anders Sundell has created different graphs, using data from the International Monetary Fund, which show the evolution of trade relations (exports and imports) between countries from 1960 to the present. If you look, China dominates now, but the picture was very different just a decade ago.
The results are clear: before 2000, the US was at the forefront of world trade, since more than 80% of the countries traded with it more than with China. By 2018, that number had shrunk to just 30%, as China quickly rose to the top position in 128 of 190 countries. The researchers point to China’s 2001 entry into the World Trade Organization as a major turning point in international trade relations.
The change that followed is clearly demonstrated in the visualization above: Between 2005 and 2010, several countries leaned toward Chinese influence, especially in Africa and Asia.
The commercial evolution of China: when, how and why
China’s growth into a world trading giant was exceptionally rapid. For several centuries, the Chinese government pursued isolationist policies. This isolation continued under Mao Zedong’s presidency, but after his death in 1976, there was a new focus on trade and foreign investment. China’s economic growth has been generally high since then.
Deng Xiaoping initiated China’s economic opening to the world in the late 1970s. The role of state-owned enterprises declined as China followed the “capitalist road”. Between 1983 and 2013, China averaged annual economic growth of around 10% per year. It followed an export-led growth strategy.
The special economic zones (SEZ) in China played an important role in the country’s economic boom and export growth. Within SEZs, such as Shenzhen, China offered tax incentives for foreign investors. These incentives included the possibility of importing equipment and technology free of duty.
Xi Jinping tried to keep China’s annual growth high by mounting debt, but faced several challenges. First, rising protectionism in the US and China’s persistent trade surplus with the US caused a trade war.
Since 2018, both sides have faced a tense relationship, imposing significant tariffs to industrial and consumer goods, and retaliation is reaching ever greater heights. China had a large number of dominant industries that created products and materials for export. The most prominent goods: consumer electronics, data processing technologies, clothing, other textiles, optical equipment and medical equipment.
China also had important trade relations with the European Union, which became China’s largest trading partner in the early 21st century. Yes, China seems to have a finger in every cake. The nation is now funding a flurry of megaprojects in Asia and Africa, but one broader initiative stands out above the rest. The initiative “One Belt, One Road” (OBOR), scheduled for completion in 2049. In 2019 alone, Chinese companies signed contracts worth up to $128 billion to start large-scale Chinese infrastructure projects in various countries.
While building new highways and ports abroad is beneficial to Chinese financiers, OBOR is also about creating new markets and trade routes for Chinese goods in Asia. And it is clear that the new infrastructure network is already transforming world trade, possibly cementing China’s position as the world’s leading trading partner for years to come.
Graphics: Anders Sundell (@sundellviz)