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China's Expansion in International Business pp 97–160Cite as

Palgrave Macmillan

The Growing Importance of China in the Global Trade

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Part of the book series: Palgrave Macmillan Asian Business Series ((PAMABS))

Abstract

The natural outcome of the transformation of the Chinese economy is its growing expansion in international trade. If in the first period the result of the high involvement of foreign investors operating in China supplying goods to international distribution networks, a rapid growth rate of Chinese exporters has been recorded since the international financial crisis. It deals with the development of China’s bilateral trade relations with the United States, the EU and Japan while pursuing a changing commodity exchange structure, the share of services, high technology and the current development of foreign trade policy.

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Notes

  1. 1.

    Most of the figures in the text of this chapter that are in US dollars ($) are on a nominal basis, not seasonally adjusted unless otherwise specified. Numbers may not equal totals due to rounding.

  2. 2.

    According to the OECD, only about two-thirds of the gross Chinese exports had a significant share of added value coming from China in 2010. For other products, only their finalisation has been done in China. Added value, mainly in the form of labour costs, accounts for less than one-fourth or even as little as one-tenth of the export value of finished products (Czech Trade, 2018).

  3. 3.

    China had insufficient financial resources for its imports in the 1990s, which caused supply disruptions mainly in China’s mainland provinces, increased social tension and pushed for a change in the system of reallocation of the state revenues. However, these disruptions did not hamper the enormous acceleration of its economy and the expansion of China’s foreign-trade ambitions.

  4. 4.

    ASEAN10—Indonesia, Malaysia, Thailand, Brunei, Singapore, the Philippines, Vietnam, Laos, Cambodia and Myanmar.

  5. 5.

    APTA—The Asia-Pacific Trade Agreement, previously named the Bangkok Agreement, signed in 1975 as an initiative of ESCAP, is a preferential tariff arrangement that aims at promoting intra-regional trade through exchange of mutually agreed concessions by member countries. APTA has five members, namely Bangladesh, China, India, Republic of Korea, Lao People’s Democratic Republic and Sri Lanka. Key objective is to hasten economic development among the six participating states opting for trade and investment liberalisation measures that will contribute to intra-regional trade and economic strengthening through the coverage of merchandise goods and services, synchronised investment regime and free flow of technology transfer, putting all the participating states in an equally favourable situation.

  6. 6.

    The price of services provided by Chinese companies is, on average, significantly lower than those charged by companies in developed countries. Additionally, services of Chinese companies usually offer their customers a higher price/quality ratio that is a result of the high level of automation and the unique productivity of Chinese workers resulting from their low wages in this sector.

  7. 7.

    We will get a different perspective on China’s position in the global service trade if we look at results of the Greater China region. In 2015, the region’s services exports reached $626 bil., whereas its services imports were $743 bil. The balance was −$117 bil. The bulk of this trade results from the FDI activity in this territory (UNCTAD, 2016a).

  8. 8.

    The original participants of the TPP were: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and United States.

  9. 9.

    The potential members of the TPP responded to the withdrawal of the United States by deciding to establish the agreement without the participation of the United States. They announced this decision during the ASEAN meeting in Vietnam in November 2017, which was attended by D. Trump.

  10. 10.

    Another reaction to the rejection of this agreement by the United States was the announcement of the One Belt One Road (OBOR) initiative that was joined by some of the original TPP signatories in 2017 (Dzigovbrodskij, 2017).

  11. 11.

    The strong political and ideological “tensions” between the two countries had very negative consequences for China, mainly affecting its food supplies, but also the supplies of machinery and industrial facilities. China responded by implementing the so-called “Cultural Revolution” initiative, which concentrated on supporting of village communities, de-urbanising of cities and self-sufficiency of the country’s production. The initiative had tragic consequences on the domestic economy and was ultimately the reason for the arrival of a new political leadership headed by Deng Xiaoping, and China’s greater opening to the world that started in the early 1980s.

  12. 12.

    The implementation of various autonomous protectionist measures by the US Administration has only increased the price of Chinese goods in the domestic market, whereas the importers have always found a way to bypass these measures and get the goods into the US market. Cheap goods, however, helped to greatly reduce the real loss of purchasing power of $, which had a significant impact on the social outlook and the economic stability of the country.

  13. 13.

    The rapidly increasing demand of China contributed to higher commodity prices; however, the supplier constraints and the depreciation of $ had also played their role in the process. The prices of copper, iron ore, lead, nickel and zinc, which enjoy the highest demand from China, rose the most. China was a net importer of all these metals and their consumption grew over 16% on average each year. For example, the price of copper grew by 300% between 2000 and 2010, whereas it was by 700% for nickel 2002–2008, etc.

  14. 14.

    The official relations between the EEC and China were launched in May 1975 when C. Soames visited China as the first European Commissioner. At that time, the EEC-China relationships could be characterised as the support of traditional trade. At the end of the 1970s, several important events took place, including the signing of the trade agreement between the EEC and China, and the official visits of R. Jenkins, the President of the European Commission and E. Colombo, the President of the appointed European Parliament. The ratification of this agreement and establishment of a mixed committee to promote the EU-China relations and launching of the opening-up policy by China have greatly contributed to the increase of their mutual trade. The EU-China cooperation has gradually expanded to almost all key sectors, including scientific and research programmes as well as academic and cultural exchanges. In 1983, the cooperation was extended also to science and technology.

  15. 15.

    Its implementation is linked to the joint economic summits of the EU and China, which have been organised since 1998 and attended by the highest political representatives of both economic entities. The entire previous period of economic cooperation was marked by the deepening of this partnership and its institutionalisation. Mutual trade relations suffered damage following the massacre of the protesters at Tiananmen Square in 1989. As a response, the EU imposed sanctions on the imports of the Chinese goods and an arms embargo. The result was the freezing of mutual trade. In 1995, when most sanctions were lifted, both trade and political relations began to recover. Since this period, also in the context of the preparation of China’s accession to the WTO, cooperation has been normalised.

  16. 16.

    Paradoxical concerning the decisions of the US administration to reduce the imports from China is the fact that the bulk of the imports comes from the subsidiaries of US MNCs. The low prices of China’s imports to the United States do not allow US companies to compete with them, and the low market prices of such imports enable American citizens with low income to overlook their low salaries and the decreased purchasing power of $.

  17. 17.

    “The Renminbi’s inclusion reflects the progress made in reforming China’s monetary, foreign exchange, and financial systems, and acknowledges the advances made in liberalizing and improving the infrastructure of its financial markets. The continuation and deepening of these efforts, with appropriate safeguards, will bring about a more robust international monetary and financial system, which in turn will support the growth and stability of China and the global economy” (IMF, 2016).

  18. 18.

    The rising oil prices also reflected higher export figures, for example, in the prices of paraxylene (raw material from which polyester fibres and polyester resin necessary for automotive plastics are produced).

  19. 19.

    In 2017, the global car sales of Toyota were 10.5 mil. units (Lavička, 2018).

  20. 20.

    Since it is assumed that there are abundant reserves of crude oil (about 11 bil. barrel), natural gas and precious metals in this area, Vietnam, Brunei, the Philippines, Malaysia, Taiwan and Japan also claim parts of these territories. According to the decision of the International Court of Justice (Hague), China is not legally entitled to this territory but continues its annexation (Xinhua, 2012).

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Authors and Affiliations

  1. Department of International Trade, University of Economics in Bratislava, Bratislava, Slovakia

    Peter Baláž & Stanislav Zábojník

  2. Sberbank CZ, Praha 5, Praha, Czech Republic

    Lukáš Harvánek

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  1. Peter Baláž
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  2. Stanislav Zábojník
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  3. Lukáš Harvánek
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Correspondence to Peter Baláž .

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Baláž, P., Zábojník, S., Harvánek, L. (2020). The Growing Importance of China in the Global Trade. In: China's Expansion in International Business. Palgrave Macmillan Asian Business Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-21912-3_3

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