Readers Question: China’s exports have decreased, and its growth as well, since the big economic crisis, but my question is How much does this affect its GDP because i heard they export to countries that are closer, like Japan for example instead of the states.
China has enjoyed near double digit growth for the past decade. However, this has largely been caused by exports. Last year, domestic consumption in China accounted for only 35% of GDP (this compares to 72% in the US). This accounts for the huge current account surplus that China has. This focus on export led growth is fine when the global economy is doing well, but now that the US economy is in a deep recession China is seeing a precipitous drop in exports. Economic growth in China is falling from 10% to 7%; this may still sound very impressive. But, the nature of the Chinese economy is that people argue, growth of less than 6% would lead to a sharp rise in unemployment.
Japan is also in recession, so exports to Japan will remain low.
In the short term, China will face difficulties. On the other hand, this does give some benefits to China
Help to reduce inflationary pressure. With growth at 10% there were worrying signs of overheating and inflation.
It may force China to boost its domestic consumption and rely less on export led growth. This would help to reduce the current account surplus and the global imbalance in savings and debt.