China’s Market Share Soars During Global Downturn

I have repeatedly argued that China is in the middle of a bubble of easy credit – which will eventually crash. See this, this and this.

And China had huge residential and commercial real estate bubbles, just like most of the rest of the world (housing bubbles have also collapsed in France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions).

Moreover, everyone knows that China’s economy is based on exports and that – with the current economic downturn – Americans are spending less.

You might assume that means that China’s position in the world economy is threatened. In other words, you might assume that the downturn hits China’s export-centered economy harder than other economies.

But as the New York Times points out, China’s share of global exports has soared, out-competing Germany, Japan and everyone else, and that China’s higher share might become permanent:

With the global recession making consumers and businesses more price-conscious, China is grabbing market share from its export competitors, solidifying a dominance in world trade that many economists say could last long after any economic recovery.

China’s exports this year have already vaulted it past Germany to become the world’s biggest exporter…

China is winning a larger piece of a shrinking pie. Although world trade declined this year because of the recession, consumers are demanding lower-priced goods and Beijing, determined to keep its export machine humming, is finding a way to deliver.

The country’s factories are aggressively reducing prices — allowing China to gain ground in old markets and make inroads in new ones…

The most striking gains have come in the United States, where China has displaced Canada this year as the largest supplier of imports…

One reason is the ability of Chinese manufacturers to quickly slash prices by reducing wages and other costs in production zones that often rely on migrant workers…

”China has a huge advantage,” says Nicholas R. Lardy, an economist at the Peterson Institute for International Economics in Washington. “They can adjust to market changes very rapidly. They have flexibility in their labor markets. And as consumers trade down the quality ladder, China can benefit.”

The expiration of textile quotas in large parts of the world this year has also allowed China to increase its market penetration…

Though that represented a 22 percent decrease from the first half of 2008, it compares favorably to other major exporters. German exports, for example, have fallen 34 percent over the same period. Japanese exports were down 37 percent and American exports 24 percent, according to Global Trade Information Services.

Trading powerhouses like Germany are suffering from weaker demand for heavy equipment, automobiles and luxury goods. But the value of exports from oil-producing countries, like Russia and Saudi Arabia, has fallen even more…

American imports from Saudi Arabia have fallen 65 percent…

After letting its currency rise against the dollar, beginning in July 2005, China is once again pegging it closely to the dollar. As the dollar has fallen against other major currencies like the euro — about 15 percent since a year ago — Chinese imports have become more and more competitive.

While China has problems, the fact that it is gaining export share in this harsh environment is a very positive sign for the ancient nation.

The fact that China has virtually cornered the market for rare earth metals also helps that country.

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  • http://Anonymousnoreply@blogger.com Anonymous

    Looks like a smoking gun, as to why the USD is down. China's dumping it for a trade advantage.

  • http://www.blogger.com/profile/04002636865996847926 Steve From Virginia

    Indeed, China wins the booby prize, the corner the market on 'cheap', raking in diminishing returns on diminishing marginal wages.Weren't the Chinese business hotshots just talking about increasing 'consumption'?The question is how will the Chinese workers pay for this consumption with shrinking paychecks? At the same time, how can the importers of Chinese products remain as viable customers when their domestic/trade businesses are undercut?Ho hum, I'm getting tired of repeating myself: the rising oil prices are eating into Chinese margins, just as these are destroying business balance sheets in developing countries. How do I come to this conclusion? Margins in China are thin and getting thinner! Continuing unemployment is the signal for more energy- gobbling transport and automation. Begger- thy- neighbor is exactly the wrong tactic for this 'ancient country'; I see the 'China has already walked away from Derivatives' header. Bad move, the only strategy that will succeed will be more cooperation, not 'me first- ism'.

  • http://Anonymousnoreply@blogger.com Anonymous

    …they have flexibility in their labour markets..that kinda sums it up don't it. amazing what a communist regime can do to facilitate such a willing set of slaves.the race to the bottom is on.

  • http://www.blogger.com/profile/16292980282480526542 bosunj

    China's exports account for only 38% of its GDP.

  • http://juliekinnear.com Real estate Toronto

    Hello. Well, yes, it seems that China is taking the advantage of the financial crisis. The problem is that if we don't stop living in debt the situation won't get any better. I'm quite worried about the situation in the US because the Americans are used to living in debt and they still continue taking another loans. However, this is not certainly the right way to get out of the recession.Take care,Julie

 

 

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