Grow­ing China is re­pay­ing the world

China Daily (Canada) - - ONE WEEK FREE SMART EDITION -

The on­go­ing mod­ern­iza­tion drive in China is one of the largest in hu­man his­tory. It will pro­vide mod­ern living con­di­tions to an es­ti­mated 1.5 bil­lion peo­ple— that is, one and half times the com­bined pop­u­la­tion of the de­vel­oped world— by the mid­dle of the 21st cen­tury.

To en­sure the suc­cess of this mod­ern­iza­tion drive, China needs to im­port huge amounts of re­sources, fu­els, de­vices and con­sumer goods, which will boost the growth of the global mar­ket. In this con­text, the past fewyears have re­vealed three ma­jor changes in Sino-US trade that best il­lus­trate China’s growth as the world’s big­gest mar­ket.

The most im­por­tant change, of course, is thatUS ex­ports to China have grown faster than im­ports from China. In 2000, the Chi­nese main­land was the 11th largest ex­port­ing mar­ket of theUnited States, but by 2007, it had over­taken Ja­pan to be­come the third largest. Over­all, US ex­ports to the Chi­nese main­land, Hong Kong andMa­cao grewfrom $30.9 bil­lion in 2000 to $164.8 bil­lion in 2013, mak­ing them the fastest grow­ing mar­ket forUS ex­ports.

US Sec­re­tary of State John Kerry has said that ev­ery $1 bil­lion worth of ex­ports cre­ates more than 5,000 jobs for theUS, so $164.8 bil­lion means about 830,000 jobs— the best gift for a coun­try whose politi­cians have been split­ting hair over the high un­em­ploy­ment rate.

What’s more, such growth will re­main sta­ble in the long run, be­cause in their quest to raise their living stan­dards Chi­nese peo­ple will con­tinue to im­port more goods from theUS. And even though theUS is try­ing to push for­ward the Tran-Pa­cific Part­ner­ship Agree­ment as a club dom­i­nated byWestern economies, it can­not af­ford to ig­nore China’s huge mar­ket po­ten­tial.

Be­sides, Chi­nese in­vest­ment in theUS is grow­ing faster thanUS in­vest­ment in China. Ac­cord­ing to NewYork-based ad­vi­sory Rhodium Group, China’s ac­tual in­vest­ment in theUS from 2003 to 2013 was $25.5 bil­lion and has con­tin­ued to grow since the 2008 global fi­nan­cial cri­sis, and by 2020, China’s to­tal in­vest­ment in theUS is ex­pected to ex­ceed that of theUS in China.

The rea­sons why Chi­nese in­vestors find theUS at­trac­tive are not only the rule of law, a well-trained work­force, ad­vanced tech­nolo­gies and con­ve­nient en­ergy sup­ply, but also its huge con­sump­tion mar­ket. China’s for­eign ex­change re­serves have fur­ther boosted its over­seas in­vest­ment. As Pres­i­dent Xi Jin­ping said at the Bei­jing APEC meet­ing last year, China’s over­seas in­vest­ment will reach $1.25 tril­lion in 10 years, sec­ond only to the US’.

More­over, the in­ter­na­tion­al­iza­tion process of the yuan has been gain­ing pace. Since 2003, US politi­cians have been putting pres­sure on China for the yuan’s ap­pre­ci­a­tion to ease the trade im­bal­ance. Yet the Chi­nese cur­rency has ap­pre­ci­ated at its own but steady pace. This shows China is con­fi­dent of the yuan’s in­ter­na­tion­al­iza­tion process.

In fact, the yuan started be­com­ing popular with neigh­bor­ing coun­tries and re­gions in the 1990s. Grad­u­ally, it started ap­peal­ing toWestern economies too. To­day, off­shore yuan re­serves have reached 2 tril­lion yuan ($319.7 bil­lion), whileUnionPay cards of China’s banks can be used in 142 coun­tries and re­gions. Also, China has been mak­ing ef­forts to get the yuan into the Spe­cial Drawing Rights bas­ket of the In­ter­na­tional Mon­e­tary Fund by 2020.

Nick­named “pa­per gold”, the cur­ren­cies listed in the IMF bas­ket are au­to­mat­i­cally in­cluded by the world’s 220 economies in their for­eign cur­rency re­serves. Up to now the bas­ket has only four cur­ren­cies— theUS dollar, the euro, Bri­tish pound and the Ja­panese yen. Ev­ery five years, the IMF de­lib­er­ates which cur­ren­cies to list in the bas­ket and the yuan is the strong­est can­di­date for the 2020 de­lib­er­a­tion.

In its re­port, “Global Devel­op­men­tHori­zons 2011: Mul­ti­po­lar­ity — TheNewGlobal Econ­omy”, the World Bank has said theUS dollar would lose dom­i­nance by 2025 and be re­placed by a multi­na­tional cur­rency sys­tem cen­tered on the dollar, the euro and the yuan. China needs to take mea­sures to en­sure the­World Bank’s pre­dic­tion comes true, so that Chi­nese na­tion­als can travel any­where in the world with a yuan ac­count. The au­thor is a re­searcher at Cen­ter for US-China Re­la­tions, Ts­inghua Uni­ver­sity.

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