China surpassed the US to become the world's biggest trading nation last year as measured by the sum of exports and imports of goods, a milestone in the Asian nation's challenge to the US dominance in global commerce.
US exports and imports of goods last year totaled 3.82 trillion dollars, the US Commerce Department said last week. China's customs administration reported last month that the country's total trade in goods in 2012 amounted to 3.87 trillion dollars.
China's increasing influence threatens to disrupt regional trading blocs as it becomes the most important commercial partner for countries including Germany, which will export twice as much to China by the end of the decade as it does to neighboring France, said Goldman Sachs's Jim O'Neill.
For so many countries around the world, China is becoming rapidly the most important bilateral trade partner said O'Neill, chairman of Goldman Sachs's asset management division and the economist who bound Brazil to Russia, India and China to form the BRIC investing strategy.
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.
When taking into account services, US total trade amounted to 4.93 trillion dollars in 2012, according to the US Bureau of Economic Analysis. The US recorded a surplus in services of 195.3 billion last year and a goods deficit of more than 700 billion, according to BEA figures. China's 2012 trade surplus, measured in goods, totaled 231.1 billion. The US economy is also double the size of China's, according to the World Bank.
In 2011, the US GDP reached 15 trillion dollars while China's totaled 7.3 trillion. China's National Bureau of Statistics reported January 18 that the country's nominal GDP in 2012 totaled 51.93 trillion Yuan (8.3 trillion).
It is remarkable that an economy that is only a fraction of the size of the US economy has a larger trading volume, Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail. The surpassing of the US is not because of a substantially undervalued currency that has led to an export boom, said Lardy, noting that Chinese imports have grown more rapidly than exports since 2007.
The US emerged as the preeminent trading power following World War II as it spearheaded the creation of the global trade and financial architecture and the UK began dismantling its colonial empire. China began focusing on trade and foreign investment to boost its economy after decades of isolation under Chairman Mao Zedong. Economic growth averaged 9.9% a year from 1978 through 2012 launched by Deng Xiaoping.
China became the world's biggest exporter in 2009, while the US remains the biggest importer, taking in 2.28 trillion dollars in goods last year compared with China's 1.82 trillion of imports.
China was last considered the leading economy during the height of the Qing dynasty. The difference is that in the 18th century, the Qing Empire unlike rising Britain didn't focus on trade.
The Emperor Qianlong told King George III in a 1793 letter that we possess all things. I set no value on objects strange or ingenious, and I have no use for your country's manufactures.
While China is the biggest energy user, has the world's biggest new car market and the largest foreign currency reserves, a significant portion of China's trade involves importing raw materials and parts to be assembled into finished products and re-exported, an activity that provides only modest value added, Eswar Prasad, a former International Monetary Fund official who is now a professor at Cornell University in Ithaca, New York, said.
Last month China's trade expanded more than estimated, with exports rising 25% from a year earlier and imports increasing 28.8%, government data released this week showed. However economists from some banks in the Pacific basin recently questioned the veracity of China's export data after the Customs administration reported an unexpected 14.1% export gain.