China Exports
Economists are quite vigorously debating if China’s economic growth is becoming more domestically led or is largely dependent on exports. It is an important debate for both executives and policy makers. If the Chinese economy is becoming increasingly investment focused and consumption based it might improve the possibility of becoming a trading partner that is more balanced with the economies of the world that are developed. However, the businesses that are considering entering or are already operating in China might be able to find greater opportunities because the economy is accelerating its transition from its manufacturing industries to a primary market for consumers.
There has been a new way to measure China’s economic expansion overall and the role of the growth of exports in China. Although those exports have been a primary driver of China’s economy, it isn’t as much of a driver as was once believed. The fact is that there is a clear indication that China’s economy is shifting towards an economy that is driven domestically. It appears that the Chinese economy is growing with its successful supply chain strategies of business and growth in China and everywhere else.
There have been problems with determining China’s reliance in exports because it is difficult to measure the export sector appropriately that have resulted in these debates. The conventional measure that most economic analysts and the government use is the growth of total exports as a share of the growth of the Gross Domestic Product (GDP). This measure has indicated that the growth of exports has accounted for, on average, nearly 40% of the total growth in real GDP since 1990. This represents an increase of nearly 60% since the year 2000.
However, while this increase portrays a picture of a dominant and growing role of exports the fact is that China was one of the only nations that didn’t suffer from the economic downturn in 2008 and 2009. This suggests that domestic growth was very important. This is one reason that some economists use a measure of growth that is very much different. They measure the growth by the total exports minus total imports or net exports as a share of growth of the GDP. With that measurement the exports only contributed somewhere between 10% and 20% of the annual 10% of the growth in GDP in recent years in China.
However, both systems of measurement are somewhat misleading. When the total exports measurement system is used it doesn’t take into account the fact that there are many of the exports in China whose shipments include several imported goods that modified prior to being exported by either combined with domestic content or by being reassembled. When the imports aren’t removed from the figure of total exports the amount of value the exports contribute to the GDP is overstated. Conversely, the measurement of exports minus imports or net exports underestimates the amount of value the exports contribute to the GDP, since many of the imports aren’t used in the assembly nor exported but instead are sold to Chinese businesses and consumers.
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