.jpg)
China overtaking US as global trader
Shin Cheol-soo no longer sees his future in the United States.
The South Korean businessman supplied components to American automakers
for a decade. But this year, he uprooted his family from Detroit and
moved home to focus on selling to the new economic superpower: China.
In just five years, China has surpassed the United States as a trading
partner for much of the world, including U.S. allies such as South Korea
and Australia, according to an Associated Press analysis of trade data.
As recently as 2006, the U.S. was the larger trading partner for 127
countries, versus just 70 for China. By last year the two had clearly
traded places: 124 countries for China, 76 for the U.S.
In the most abrupt global shift of its kind since World War II, the
trend is changing the way people live and do business from Africa to
Arizona, as farmers plant more soybeans to sell to China and students
sign up to learn Mandarin.
The findings show how fast China has
ascended to challenge America's century-old status as the globe's
dominant trader, a change that is gradually translating into political
influence. They highlight how pervasive China's impact has been,
spreading from neighboring Asia to Africa and now emerging in Latin
America, the traditional U.S. backyard.
Despite China's
now-slowing economy, its share of world output and trade is expected to
keep rising, with growth forecast at up to 8 percent a year over the
next decade, far above U.S. and European levels. This growth could
strengthen the hand of a new generation of just-named Chinese leaders,
even as it fuels strain with other nations.
Last year, Shin's Ena
Industry Co. made half his sales of rubber and plastic parts to U.S.
factories. But his plans call for China, which overtook the United
States as the biggest auto market in 2009, to rise fivefold to 30
percent of his total by 2015. He and his children are studying Mandarin.
"The
United States is a tiger with no power," Shin said in his office, where
three walls are lined with books, many about China. "Nobody can deny
that China is the one now rising."
Trade is a bit like football —
the balance of exports and imports, like the game score, is a neat
snapshot of a jumble of moves that make up the economy, and both sides
are apt to accuse each other of cheating from time to time. Also, the
U.S. and China are both rivals and partners who can't have a match
without each other, and a strong performance from both is good for the
entire league.
Trade may get less publicity than military affairs
or diplomacy, yet it is commerce that generates jobs and raises living
standards. Trade can also translate into political power. As shopkeepers
say, the customer is always right: Governments listen to countries that
buy their goods, and the threat to stop buying is one of the most
potent diplomatic weapons.
China has been slow to flex its
political muscle on a large scale but is starting to push back in
disputes over trade, exchange rates and climate change.
"When a
German chancellor or French president goes to China, right at the top of
the list, he's trying to sell Airbuses and other products and is being
sensitive to China's political concerns, like on human rights," said C.
Fred Bergsten, a former U.S. Treasury Department official who heads the
Peterson Institute for International Economics in Washington.
The
United States is still the world's biggest importer, but China is
gaining. It was a bigger market than the United States for 77 countries
in 2011, up from 20 in 2000, according to the AP analysis.
The AP
is using International Monetary Fund data to measure the importance of
trade with China for some 180 countries and track how it changes over
time. The analysis divides a nation's trade with China by its gross
domestic product.
The story that emerges is of China's breakneck
rise, rather than of a U.S. decline. In 2002, trade with China was 3
percent of a country's GDP on average, compared with 8.7 percent with
the U.S. But China caught up, and surged ahead in 2008. Last year, trade
with China averaged 12.4 percent of GDP for other countries, higher
than that with America at any time in the last 30 years.
Of
course, not all trade is equal. China's trade is mostly low-end goods
and commodities, while the U.S. competes at the upper end of the market.
Also,
even though Chinese companies invest abroad and employ thousands of
foreign workers, they lag behind American industry in building global
alliances and in innovation, which is still rewarded in the marketplace.
China's competitive edge remains low labor and other costs, while the
U.S. is the world's center for innovation in autos, aerospace,
computers, medicine, munitions, finance and pharmaceuticals. The Chinese
have yet to build a car that will pass U.S. or European emission
standards.
And the United States still does more trade overall —
but just barely. If the trend continues, China will push past the U.S.
this year, a remarkable feat for a country so poor 30 years ago that the
average person had never talked on a telephone.
"The center of
gravity of the world economy has moved to the east," said Mauricio
Cardenas, the finance minister in Colombia. Like most of Latin America,
his country is still more closely tied to the U.S., but its trade with
China has risen from virtually nothing to 2.5 percent of GDP, a more
than tenfold increase since 2001. "I would say that there is nothing
comparable in the last 50 years."
In one sense, China's growing
presence in trade is just restoring the Middle Kingdom to its historic
dominance. China was the biggest economy for centuries until about 1800,
when the industrial revolution propelled first Europe and then the U.S.
into the lead.
China began its return to the global stage in the
1990s as a manufacturer of low-priced goods, from T-shirts to toys.
Factories in other countries slashed costs to meet the "China price" or
were pushed out of the market.
As the new millennium dawned, the
U.S. remained by far the world's dominant trader, rivaled collectively
by Europe but no single nation. However, from 2000 to 2008, China's
imports grew 403 percent and exports 474 percent, driven in part by its
entrance into the World Trade Organization and its move to higher-value
production.
China's imports of oil and raw materials for its
factories propelled resource booms in parts of Asia, Africa and Latin
America. China's demand for steel for manufacturing and construction
grew so fast that its mills now consume half the world's output of iron
ore.
Zambia, a major copper producer, switched to the China column
in 2000. Australia, a coal and iron ore exporter, followed in 2005.
Chile, another copper supplier, moved in 2009.
Meanwhile, exports
surged as Apple, Samsung, Nokia and other electronics giants shifted
final assembly to China. Shipments of mobile phones, flat-screen TVs and
personal computers have jumped sevenfold over the past decade to nearly
$500 billion. That made China a major customer for high-tech components
supplied by countries such as South Korea, which swung into China's
column in 2003, followed by Malaysia in 2007.
In the U.S.,
Vermont-based manufacturer SBE Inc. started exporting capacitors —
energy-storage devices used in computers, hybrid cars and wind turbines —
in 2006. The company now gets 15 to 20 percent of its revenue from
China, and has hired 10 employees there.
As China grew richer, its people spent more.
Chinese
ate more pork, fried chicken and hamburgers, rapidly sending up the
demand for soybeans to make cooking oil and feed for pigs and cows. Some
cattle ranchers in Latin America turned grazing land into fields of
soy, a crop few in their region consume. Soybean exports helped push
Brazil into the China column in 2010, and put China neck and neck with
the U.S. as Argentina's top trading partner.
In the Brazilian
state of Mato Grosso, some 10,000 miles (17,000 kilometers) from
Beijing, farmer Agenor Vicente Pelissa and his family raise cattle and
soy on 54,300 acres, a farm twice the size of Manhattan. Half their
21,000-ton annual soybean harvest goes to China.
"We've invested
more in technology and in better machines and equipment to meet this
rising demand," Pelissa said. "If it hadn't been for China, we would not
have not modernized our operations, at least not as quickly as we did."
Even
in the U.S., better known for manufacturing, farmers are rushing to
sell to China. The United States is the largest exporter of soybeans to
China, followed by Brazil and Argentina. China's purchases of American
soybeans have risen from almost nothing 20 years ago to a quarter of the
crop: 24 million tons worth $12.1 billion, America's largest export to
China.
The boom is having a profound effect on farming
communities, said Grant Kimberley, whose family farm near Des Moines,
Iowa, now grows 4,000 acres of soybeans, up from 3,500 eight years ago.
"It's
provided more revenue for these farmers than they've ever seen in their
lives," said Kimberley, who is also director of market development at
the Iowa Soybean Association. He said he sees more young people
returning to the farm. "People can see there's an opportunity to make
nice livings for their families."
It was the 2008 global crisis that showed the resilience of China's exporters.
The
recession set everyone back, but China less so than the U.S. or other
major traders such as Germany. China does a bigger share of its trade
with developing countries that suffered less and rebounded faster, while
the United States sells to rich economies that are struggling. Chinese
companies have boosted exports by 7 percent this year despite anemic
global demand.
During the recession, Shin, the South Korean auto
parts manufacturer, saw his sales fall 50 percent. He shut one of three
production lines, and banks stopped lending him money.
But China's
auto market was powering ahead. So Shin hired an employee in China, and
is now making plans for his first factory there. On a business trip to
Germany, clients told him their Chinese factories would be larger than
those at home.
Parents like Shin, who work at companies doing
business with China, in turn fed enrollment growth at schools such as
Teacher Ching, a Chinese-language kindergarten in Seoul.
Nancy
Ching, the daughter of immigrants from Taiwan, opened the school with 15
students in 2004, the year after South Korea first moved from the U.S.
column to the China column. Today she has 60.
"Mothers who send
their kids here believe our children's generation is the China
generation," she said in Chinese-accented Korean. "In the future,
without learning Chinese, one won't be able to get a job."
China
resumed its upward trajectory in the last two years. Even with key
Western markets in a slump, exports are up 58 percent since 2009.
Imports are up an even sharper 73 percent.
Rising incomes have
driven demand for wine and other luxury goods, making China a lifeline
for European and American vineyards when the global crisis battered
traditional markets.
The Chinese have "helped Bordeaux a lot these
past three years," said Florence Cathiard, owner of Chateau Smith Haut
Lafitte in the Pessac-Leognan area of France's southwest, home of
high-end Bordeaux wine.
France's wine exports to China first
surged in 2009, and by last year, China had surpassed the U.S. as a
customer by volume. Americans still spend more, because they buy more
expensive wines. But China is developing a taste for grand cru wine, the
"great growths" that are considered exceptional and command higher
prices.
Cathiard acknowledged that she was initially wary of China
as a reliable market for her high-end wines. But the turning point for
her came around 2008, when she was blown away by the number of people
showing up for a master class by her chateau at a wine expo in Hong
Kong.
China now accounts for 25 percent of Cathiard's sales, making it her largest market.
The
owners of Chateau Haut-Bailly, also in Pessac-Leognan, first traveled
to China to test the waters in 2000, and it was too early.
"At the time, they didn't know what a cork or a corkscrew was," said Veronique Sanders, the chateau's general manager.
Chinese sophistication has since advanced rapidly, she said.
"The
difference with other emerging markets we've gone into in the past is
the size of the country, which means it has an absolutely incredible
potential."
The next step in China's trade evolution is to move
beyond exporting TVs and lawn furniture to selling services and
investing abroad.
The investment trend started with state-owned
companies that bought stakes in foreign mines and oil fields. Smaller
and private Chinese companies followed, acquiring foreign enterprises to
gain a bigger foothold in overseas markets, more access to resources
and better technology for their own development.
China is now pushing into construction and engineering, where U.S. and European companies have long dominated.
In
Algeria, Chinese state-owned companies pushed aside established French
and German rivals to win contracts to build a $12 billion cross-country
highway and the $1.3 billion Great Mosque of Algeria. The Chinese have
also built highways, dams and other projects in developing countries and
are starting to win contracts in the U.S. and Europe.
On a new
50-kilometer (30-mile) highway leading north of Nairobi, the capital of
Kenya, dark asphalt stretches across six to eight lanes.
The $300
million road was built by three Chinese companies and financed by the
African Development Bank and the Export-Import Bank of China. It has cut
a trip that took several hours 18 months ago to 10 minutes, said Joseph
Makori, a professional driver.
"When we see the people from
America, they say, 'We want to assist Kenya'," said Makori as he looked
for work at an interchange about 10 kilometers from downtown. "But I
don't see it. China comes and I see one thing: the road."
Chinese
companies are starting to win government contracts in Kenya, which has
ports that offer access to landlocked Uganda, South Sudan and Rwanda.
Governments in Africa are keen to work with China because it does not
tie development to human rights or democracy, said Stephen Mutoro,
secretary general of the Consumer Federation of Kenya.
"China
appears to have a long-term plan based on increasing its commercial
interests where governance issues are given a back burner," Mutoro said.
The experience of Congo might foreshadow a more complex
approach that Beijing envisages for other African nations. In 2008, the
two governments signed a $9 billion deal for Chinese companies to build
177 hospitals and health centers, two hydroelectric dams and thousands
of miles of railways and roads. In exchange, Congo was to provide 10.6
million tons of copper and 600,000 tons of cobalt.
The deal has
since been scaled back to $6 billion under pressure from the
International Monetary Fund, which felt Congo was taking on too much
debt.
China's outbound investment totaled $67.6 billion last year —
just one-sixth of America's nearly $400 billion — but it could reach $2
trillion by 2020, according to a forecast by Rhodium Group, a research
firm in New York City.
As a result, Chinese companies are using a new export — jobs.
Employees
at Volvo Cars worried after Chinese automaker Geely Holdings bought the
money-losing Swedish brand from Ford Motor Co. in 2010. But two years
later, instead of moving jobs to China, Geely has expanded Volvo's
European workforce of 19,500 to about 21,500.
Majority-owned U.S.
affiliates of Chinese companies support about 27,000 American jobs, up
from fewer than 10,000 five years ago, according to Rhodium.
In
Goodyear, Arizona, Stacey Rassas was laid off in May 2010 after a
16-year career in quality control for aerospace and aluminum
manufacturers. By late autumn, she and her husband were worried they
might lose their house.
She finally landed a job that December at a
new factory that makes solar panels for one of the world's biggest
solar manufacturers.
"It was the best day ever," she said.
Her new employer? Suntech Power Holdings Co., a Chinese company.
