The Australia-China Chamber of Commerce and Industry of New South Wales

CHAMBER REPORTS

ON RECENT DEVELOPMENTS

Update on Global Trade

7 December 2001

CONTENTS

Introduction

Rankings

China’s Dependence on Major Export Markets

Dependence on Imports from China

Preliminary Trade Data for 2001

Introduction:

In the Chamber’s commentary on the “2001 White Paper on American Business in China”, produced by the American Chamber of Commerce in China (http://www.amcham-china.org.cn), we included a table showing exports, imports and total merchandise trade for the “global top 15”. At the time the commentary was prepared (24 May 2001) the most recent data-period for such a ranking was 1999.

Since then, the World Trade Organisation (http://www.wto.org) released trade data for 2000. We decided that an update of the rankings would be informative.

More specifically, the relevance of the data concerned the following points:

v China’s importance as a trading nation has been increasing steadily and that trend is expected to continue for some time.

v Australia’s ranking as a trading nation improved during the 1990s, reaching the 13th position in 1999.

Both of these points can be re-examined with the 2000 trade data. We can also use the recent data to comment further on China’s relatively high dependence on three major export markets: USA, the European Union and Japan.

Rankings:

Table 1 contains the 1999 data shown previously and Table 2 has the 2000 data. Most of the OECD countries experienced a decline in their respective shares of total trade (exports plus imports). For example, the United States had a 20.9 per cent share in 1999, and this fell to 19.9 per cent in 2000.

Table 1: Exports, Imports and Total Trade by Value (in US$ billions) and Global Share – 1999

Country		Exports		Imports		Total
		Value	Share	Value	Share	Value	Share
1	United States	695.2	16.4%	1059.1	23.6%	1754.3	20.9%
2	Extra-EU trade	795.6	18.8%	843.4	18.8%	1639.0	18.8%
3	Japan	419.4	9.9%	311.3	6.9%	730.6	8.4%
4	Canada	238.4	5.6%	220.2	4.9%	458.6	5.2%
5	China	195.2	4.6%	165.8	3.7%	360.9	4.1%
6	Hong Kong	174.4	4.1%	180.7	4.0%	355.1	4.1%
7	Mexico	136.7	3.2%	148.7	3.3%	285.4	3.3%
8	Korea	144.7	3.4%	119.8	2.7%	264.5	3.0%
9	“Chinese Taipei”	121.6	2.9%	110.7	2.5%	232.3	2.7%
10	Singapore	114.7	2.7%	111.1	2.5%	225.7	2.6%
11	Switzerland	80.4	1.9%	79.9	1.8%	160.3	1.8%
12	Malaysia	84.5	2.0%	65.0	1.4%	149.4	1.7%
13	Australia	56.1	1.3%	69.1	1.5%	125.2	1.4%
14	Russian Fed.	74.3	1.8%	41.1	0.9%	115.4	1.3%
15	Thailand	58.4	1.4%	50.3	1.1%	108.7	1.2%
Source: World Trade Organisation.

Table 2: Exports, Imports and Total Trade by Value (in US$ billions) and Global Share – 2000

Country		Exports		Imports		Total
		Value	Share	Value	Share	Value	Share
1	United States	781.1	15.7%	1257.6	23.9%	2038.7	19.9%
2	Extra-EU trade	858.9	17.3%	965.7	18.3%	1824.6	17.8%
3	Japan	479.2	9.6%	379.5	7.2%	858.7	8.4%
4	Canada	276.6	5.6%	244.8	4.6%	521.4	5.1%
5	China	249.3	5.0%	225.1	4.3%	474.4	4.6%
6	Hong Kong	202.4	4.1%	214.2	4.1%	416.6	4.1%
7	Mexico	166.4	3.3%	182.6	3.5%	349.0	3.4%
8	Korea	172.3	3.5%	160.5	3.0%	332.8	3.2%
9	“Chinese Taipei”	148.3	3.0%	140.0	2.7%	288.3	2.8%
10	Singapore	137.9	2.8%	134.5	2.6%	272.4	2.7%
11	Malaysia	98.2	2.0%	82.2	1.6%	180.4	1.8%
12	Switzerland	81.5	1.6%	83.6	1.6%	165.1	1.6%
13	Russian Fed.	105.2	2.1%	45.5	0.9%	150.7	1.5%
14	Australia	63.9	1.3%	71.5	1.4%	135.4	1.3%
15	Thailand	69.1	1.4%	61.9	1.2%	131.0	1.3%
Source: World Trade Organisation.

The developing countries generally increased their respective shares of total trade. China’s share, in particular, rose from 4.1 per cent to 4.6 per cent. China’s exports increased by 28 per cent during the 12-month period, and imports rose by 36 per cent. Both of these growth rates are well above the global average.

Australia fell by one ranking, due mainly to the sharp increase in exports by the Russian Federation (from US$74.3 billion in 1999 to US$105.2 billion in 2000). Australia’s exports increased by 14 per cent in 2000, which is above the global average of 12 per cent but well below the export growth rate of the Russian Federation (39 per cent).

In addition, Australia’s imports rose by only 3 per cent, which can be attributed to the lower value of the Australian dollar during the period. This helped the balance of payments on current account but lowered the weighted average growth in total trade.

In general, the trade data for 2000 are consistent with expectations. The continuing growth in imports by the USA (19 per cent during the period) boosted the growth rates for other economies, including China, but China’s even greater increase in imports (36 per cent as noted above) also contributed to the export performance of other nations.

China’s dependence on major export markets:

The WTO data also show China’s trade with the United States, European Union and Japan, with significant re-exports (via Hong Kong) included. The WTO document states, in the Technical Notes, that Hong Kong’s retained imports from China cannot be obtained directly so an approximation is required. The method of approximation is such that it is expected to understate the amount of retained imports and therefore overstate the amount of re-exports from China.

This means that the sub-total in Table 3 of China’s exports to the United States, European Union and Japan may be too high and the amount of China’s exports to “others”, which included Hong Kong, may be too low. It is unlikely, however, that the difference amounts to much in percentage terms, and it should have relatively little effect on year-to-year differences.

Table 3: China’s Exports (in US$ billion) and Share of Total Exports

	1999		2000		Annual
	Amount	Share	Amount	Share	Change
United States	87.8	39.0%	103.3	41.4%	17.7%
European Union	50.2	22.3%	61.2	24.5%	21.9%
Japan	42.8	19.0%	55.1	22.1%	28.7%
Sub-total	180.8	80.3%	219.6	88.1%	21.5%
Others	44.3	19.7%	29.7	11.9%	-33.0%
Total	225.1	100.0%	249.3	100.0%
Source: World Trade Organisation.

The data shown in Table 3 indicate that China’s dependence on the three major markets increased during 2000. The share of total exports destined for USA, EU and Japan increased from 80.3 per cent in 1999 to 88.1 per cent in 2000.

The amount of exports to other markets declined in 2000, producing a negative rate of change of 33 per cent. This underscores the importance to China of finding additional export markets and to reduce the existing dependence on the three shown in the table.

China’s imports are also becoming more dependent upon the three major suppliers (Table 4), though the degree of dependence is much less than exists for exports. More specifically, the share of China’s imports from USA, EU and Japan increased from 35.8 per cent in 1999 to 38.1 per cent in 2000.

Table 4: China’s Imports (in US$ billion) and Share of Total Imports

	1999		2000		Annual
	Amount	Share	Amount	Share	Change
United States	13.1	7.9%	16.2	8.3%	23.7%
European Union	23.0	13.9%	27.8	14.2%	20.9%
Japan	23.3	14.1%	30.4	15.6%	30.5%
Sub-total	59.4	35.8%	74.4	38.1%	25.3%
Other	106.4	64.2%	120.8	61.9%	13.5%
Total	165.8	100.0%	195.2	100.0%
Source: World Trade Organisation.

China’s dependence on the three major export markets is more concentrated in clothing and textiles, as well as in other consumer goods (Table 5). Approximate 50 per cent of China’s exports in these categories is destined for these markets.

Table 5: Share of China’s Total Exports Sent to USA, EU and Japan, by Major Item in 2000

	USA	EU	Japan	Total
Office and telecom equipment	21.7	19.4	11.6	18.5
Electrical machinery	8.2	9.8	7.6	8.5
Other machinery and equipment	5.0	5.2	4.4	4.9
Clothing and textiles	10.4	16.3	30.3	17.0
Other consumer goods	40.9	30.1	17.4	32.0
Other manufacturers	9.9	13.1	9.3	10.6
Agriculture and mining	3.9	6.0	19.4	8.4
Source: World Trade Organisation.

The slower economic growth in the USA, EU and Japan during 2001 has already resulted in a decline in China’s exports to those markets, but the principal decline is expected to be felt in office and telecom equipment, for which China’s dependency is somewhat lower. The share is nevertheless approaching 20 per cent and has been rising rapidly in recent years.

Dependence on Imports from China:

The extent to which China’s products dominate the major markets varies among the three major trading partners. China has captured more than 70 per cent of Japan’s imports of clothing and textiles (Table 6). The USA and the EU apparently have other sources of supply for those items.

Table 6: China’s Share of Total Imports of USA, EU and Japan, by Major Item in 2000.

	USA	EU	Japan
Office and telecom equipment	10.2	3.8	10.5
Electrical machinery	14.5	5.5	28.1
Clothing and textiles	13.0	8.3	70.7
Other consumer goods	30.2	8.2	26.1
Agriculture and mining	1.4	0.8	55.0
Source: World Trade Organisation.

Not surprisingly, China has a much larger share of Japan’s imports of agricultural products, compared to the respective shares for USA and the EU. The share of Chinese electrical equipment in Japan’s imports in that merchandise category is also higher than the other two, but the difference is not as great.

In general, the closer distance to Japan undoubtedly has an impact on China’s import shares, particularly in the case of lower-value-per-unit items.

Preliminary trade data for 2001:

During the first 10 months of 2001, the growth rate of China’s exports was 6.1 per cent, which is a definite decline compared to the rate for the previous year 2000 (28 per cent). Imports during the same period for 2001 increased by 10 per cent (compared to 36 per cent in 2000).

As a result of these changes, China’s surplus in merchandise trade narrowed to US$17.3 billion, compared to US$24.1 billion for the 12 months of 2000. Unless there is a substantial pick-up during the remainder of 2001, the decline in net exports will slow China’s economic growth rate.

China’s domestic demand has nevertheless remained buoyant during the year, so it is unlikely that a substantially lower rate of economic growth will result for 2001. A continuing decline in exports during 2002, however, without a significant increase in government spending, will have an effect on economic growth next year.

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