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China's Market Share Soars During Global Downturn

George Washington's picture




 

Washington’s Blog.

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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Wed, 10/14/2009 - 14:04 | 98930 rr_
rr_'s picture

Excellent level of cynicism here, unlike the Steve Wynn comments section.  Are there Wynnbots pushing an agenda?

Wed, 10/14/2009 - 12:22 | 98803 bugs_
bugs_'s picture

What happens when THEIR slaves have had enough?

Wed, 10/14/2009 - 10:14 | 98637 Ben Graham Redux
Ben Graham Redux's picture

This will be China's undoing.  The rest of the world is losing employment along with their industrial bases.  At some point soon, that's going to turn and trade barriers will go up.

Wed, 10/14/2009 - 07:54 | 98531 Leo Kolivakis
Leo Kolivakis's picture

As of this morning, I heard China surpassed Canada as the number one exporter to the U.S.. By the way, if China does stumble or worse, crash, get ready for a tsunami of goods deflation!

Tue, 10/13/2009 - 22:53 | 98374 Anonymous
Anonymous's picture

China has an unfair advantage over other exporters such as Germany and Japan. Because China pegs its currency to the US dollar, which has been declining lately. While the Euro and the Japanese Yen have soared relative to the US dollar and other currencies.

I think it's only a matter of time before Germany, Japan, and USA will gang up on China and demand that it stop pegging its currency to the US dollar and let it float the way the Euro and the Japanese Yen float.

This grabbing of market share by China will probably lead to a very nasty international trade dispute. Because China isn't playing by the same rules that other exporters are playing.

Wed, 10/14/2009 - 09:03 | 98560 ozziindaus
ozziindaus's picture

"I think it's only a matter of time before Germany, Japan, and USA will gang up on China..."

Exclude USA from that gang. They are in favour of the currency peg. Don't believe anyone who tells you otherwise.

Wed, 10/14/2009 - 09:48 | 98599 tip e. canoe
tip e. canoe's picture

absolutely.

especially when american consumers continue to think they can get something for nothing.

of course, those same consumers have no consideration for what that attitude is doing to wages in the country of production.

i mean, why should we care?  they're chinese.

and quality, who needs quality, when i can get cheap, cheap, cheap!

Wed, 10/14/2009 - 10:09 | 98623 ozziindaus
ozziindaus's picture

Unfortunately it also lowers wages and standards in the US.....something the administration is also in favour of. Remember the dotcom revolution kicked off the high paying tech job outsourcing with a fiber optic network straight across the pacific to India. Concurring with the time the US last saw a true rise in real wages and surplus.....can't have that.

Next wave will be the George Soros sponsored Cherry automotive importation from China through the existing Chrysler dealership. Whatever is not in the Chrysler showrooms will be sold through Walmart. Hope you did not hear it here first  

Tue, 10/13/2009 - 21:11 | 98279 ozziindaus
ozziindaus's picture

Dirty pool old man!

Well I guess there will come a time when work standards and wages can no longer be reduced. U.S. of course totally benefits out of this deal.....don't know what the rest of the world thinks though. Maybe Germany and Japan will revisit their allied past.

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