China's total foreign trade volume surpassed $1 trillion in November 2004, making China the world's third-largest trading nation behind the US and Japan.

With a relatively low-cost labour, a government eager to facilitate foreign investment and an ever-improving infrastructure, China is poised to consolidate its dominance in manufacturing and exporting. The WTO commitments, with their promise of lower tariffs and increased foreign access to Chinese markets, have also fuelled the interest of foreign businesses, and hence, foreign direct investment.

2004 trade figures: an overview

China posted a $20.8 billion trade surplus for the first 11 months of 2004, turning around a $6.8 billion trade deficit from the first half of the year. Nevertheless, China's overall export growth lagged import growth for the second consecutive January-November period. Lower tariffs and a stronger demand for a broader array of goods, in particular construction materials and petroleum, fueled import growth.

PRC exports grew by more than 35 percent from January to November year-on-year, significantly outpacing official MOFCOM 2004 forecasts of 8 percent export growth and other analysts' predictions of 15 percent to 20 percent export growth. Main exports continued to be iron and steel, high tech products and mineral fuels.

China's imports rose more than 37 percent from January to November year-on-year, led mostly by substantial growth in imports of agricultural goods, refined petroleum, raw materials, motors, and generators. China was increasing its petroleum reserve in 2004 during a period of high world oil prices, which boosted the value of its imports for several months last year.

Rising through the global ranks

We measure China's economic rise by looking at GDP. According to international prices, GDP levels show China's percentage of global economic resources rising swiftly, with the gap with the United States narrowing significantly. China is the most rapidly expanding economy in the world and is on track to become the largest economic entity in absolute terms by 2020.

China also has more economic growth potential than most other countries. China's GDP growth potential from 1965 to 1999, according to World Bank estimates, was more than double the world's growth potential. If it lives up to its potential, China could become the biggest economic entity in the world by 2020, with its GDP making up 22.2 percent of the world's total, higher than the 20 percent of the United States China's GDP could exceed that of the United States by 2015. All of these estimates depend on whether China maintains social stability and realizes sustainable economic growth.

Source: The China Business Handbook 2005, Alain Charles Publishing Ltd.
Source: This is an excerpt from an article originally published in the Sept-Oct, 2005 .issue of the China Business Review. Reprinted with the permission of The US-China Business Council, Washington D.C.