China yet to be a strong trade nation

2013 is an unordinary year for China. New leaders came in the spotlight; the 3rd Plenary Session of the18th Communist Party of China’s Central Committee proposed an extensive reform plans; by the end of the year it was reported that China became the largest trader in the world.

The total value of China’s imports and exports in 2013 was $4.16 trillion, a 7.6 per cent increase from a year earlier on a RMB adjusted basis, according to figures released by the China's Customs Administration on January 10, 2014. The US has yet to publish its 2013 trade figures (set to be released in February 2014), but its total imports and exports of goods amounted to $3.57 trillion in the first 11 months of 2013, making it a virtual certainty that China is now the world’s biggest trade nation.

The news looks like a new landmark, indicating China’s growing economic engagement with the world has reached a new level after 35 years’ reform and opening-up. Its trade partners also benefit a lot from the process. For example, according to a report issued by Rhodium Group, 2013 was a milestone for employment provided by Chinese firms in US. Chinese-owned companies provided more than 70,000 full-time jobs in US by the end of 2013, a more than 8-fold increase compared to 2007 (around 9,000 jobs). Chinese investment in the US doubled in 2013, lifting the total deal value to a new record high of $14 billion.

More importantly, the fact also shows that China has finished the transition from inward-looking and self-dependent economy to an important stakeholder of world economy relying heavily on international trade. To sustain a more stable and benign world economic surroundings, China is to play a more active role in world affairs.

In history, China was once the world’s largest trading nation from 1644-1912. The Economist on February 16, 2013 commented, “The Qianlong emperor claimed, somewhat optimistically, that his dynasty's majestic virtue had penetrated every country under heaven. China's exporters and importers have now accomplished exactly that”. It is a remarkable achievement to be in the number one position, but it is inappropriate to compare current China to the Qing Dynasty. Current China doesn’t have Qing Dynasty’s empire ambition and is well aware of its real position in the world.

China knows well that she is a big trader, but not a strong trader. First, China still lacks indigenous innovation and many core technologies, and thus is still weak in competitiveness. In fact, US innovation has been a critical source of US economic growth and global competitiveness. According to the US Department of Commerce, its IP-intensive industries supported at least 40 million jobs and contributed $5.1 trillion (or 34.8%) to US GDP.