China has the second highest GDP in the world and it exports 15% of all the goods in the world. But how did this happen?
Just 40 years ago, the Chinese economy was in a totally different situation, accounting for less than 1% of world exports and still in the early stages of building its economy. The above animated graphic of the UNCTAD shows China’s rise to dominance in world trade over time.
Timeline: The rise to power
Mid-20th century China is remarkably different from today’s nation. Prior to the 1980s, China was going through a period of social upheaval, poverty and dictatorship under Mao Zedong.
From the late 1970s, China’s share of world exports was less than 1%. The country had few trade poles and few industries. In 1979, for example, Shenzhen was a city of barely 30,000 people.
In fact, China (excluding Taiwan * and Hong Kong) did not even appear in the top 10 world exporters until 1997, when it reached a 3.3% share of world exports.
|Year||Share of world exports||Rank|
* Editor’s Note: The above data is from the UN, which lists Taiwan as a region separate from China for political reasons.
In the 1980s, several cities and regions, such as the Pearl River Delta, were designated Special Economic Zones. These SEZs benefited from tax incentives that were used to attract foreign investment.
In addition, in 1989, the Coastal Development Strategy was implemented to use strategic regions along the country’s coast as catalysts for economic development.
The 1990s and beyond
In the 1990s, the world saw the rise of global value chains and transnational production lines, with China providing an inexpensive manufacturing hub due to low labor costs.
To complement the 1990s, the Western Development Strategy was implemented in 1999, dubbed the “Open Up the West” program. This program aimed to develop infrastructure and education to retain talent in the Chinese economy, with the aim of attracting new foreign investment.
Finally, China officially joined the World Trade Organization in 2001, which allowed the country to progress at full speed.
Made in China
Today, China is a trading giant and a manufacturing giant. Only the United States and Germany come close to their share of world exports, standing at 8.1% and 7.8% respectively.
|Rank||Country||Share of world exports (2020)|
|# 6||Hong Kong SAR||3.1%|
|# 7||South Korea||2.9%|
China’s manufacturing industry has become dominant in the production of just about anything from common household items to integral parts for automobile manufacturing. Some basic products of Chinese manufacture are:
- Precision instruments
- Industrial machines for computers and smartphones
COVID-19 has made China’s essential role in the global economy even more visceral, as significant delays in the supply chain occurred when the virus hit the country.
An economic superpower
In 2021, China’s trade recovery from the crisis outpaced most other countries – in the first quarter of 2021, its exports increased by nearly 50% compared to the quarter of the previous year, to about $ 710 billion.
And the country isn’t slowing down anytime soon. Other economic development plans are on track, such as Made in China 2025, with the aim of becoming a dominant player in global high-tech manufacturing. In addition, the famous One Belt initiative, One Road has funded infrastructure projects globally over the past decade, and the country is also a founding member of RCEP, which will soon become the largest trading bloc in the world. world.
However, China still faces a series of challenges, such as:
- Population decline
- The beginning of labor-saving technology
- Trade wars with the United States and sanctions from other trading partners, such as Europe
- The emergence of ASEAN trading powers, such as Vietnam
A declining population has many implications such as a shrinking workforce and the domestic market. In addition, many companies are moving to cheaper manufacturing centers like Vietnam.
In addition, cheap innovations in labor-saving technologies, such as robotics and automation, have already started to undermine the cheap manual labor that has made China the global manufacturer.
All of these and more could lead to a slowdown in the growth of China’s export dominance. However, while China’s future may not be certain, currently global trade and production could not function without it.