Guest Post: China Surpasses U.S. As Number One Global Trading Power

Tyler Durden's picture

Submitted by Brandon Smith from Alt-Market

China Surpasses U.S. As Number One Global Trading Power

Back in 2008, at the onset of the derivatives and credit collapse, I wrote several economic editorials discussing what I saw as the single most vital trend in the global fiscal system, and how it would cause a disastrous upheaval that would leave the U.S. and the dollar financially sunk.  This trend, which seemed to take serious root in 2005, was the massive shift by China from an export dependent source of cheap manufacturing and labor, into a moderate exporter, and consumer hub, and currency powerhouse.  In my view at the time, the evidence suggested that China was positioning itself to decouple from its dependence on U.S. markets and the dollar.  I was, of course, attacked as a “doom monger” and “conspiracy theorist”.  Five years later, the critics have changed their tune…

For the past decade, China has been slowly but surely issuing Yuan denominated bonds and securities around the globe, while simultaneously forming bilateral trade agreements with multiple nations and cutting out the U.S. dollar as the world reserve currency.  This process has gone mostly ignored by the mainstream financial media.  However, I and many other independent analysts could not overlook the red flags.  I tried to summarize as much of the situation and facts as I could in my article ‘How The U.S. Dollar Will Be Replaced’, which was published in May of last year:

The biggest question for me was, if China is one of the largest holders of Forex reserves on the planet, and had the largest savings of any nation, WHY did they feel the need or desire in 2005 to begin issuing Yuan denominated debt?  Why begin borrowing capital from foreign creditors?  They certainly didn’t need the money.  Why were they moving away from export dependency and building a consumer base?  And why attempt to proliferate their currency?  Wouldn’t the pursuit of global Yuan circulation lead to an eventual increase in valuation?  Didn’t the Chinese want their currency cheap so that they could maintain export superiority?  What did the Chinese know in 2005 that we didn’t?

Well, apparently they were either psychic, or SOMEONE gave them advanced warning.  They knew that there would be a crisis in American consumption and that this would lead to severe reduction in imports, which is why they began building trade deals within the ASEAN trading bloc to insulate themselves.  They knew that there would be considerable devaluation in the dollar, which is why they converted much of their long term treasury holdings to short term treasury bonds that they could dump with far more ease, and they knew that the IMF would be promoting Special Drawing Rights as a new reserve replacing the dollar, which is why they have been spreading the Yuan everywhere, earning them favor with the global banksters and inclusion in the basket currency.  In fact, China has been pumping Yuan into global markets even faster than the Federal Reserve has been printing the dollar:

China is flooding the system with Yuan!  This means only one thing; China is no longer seeking to maintain the traditional trade relationship it has had with the U.S.

To make my case even more clear, I would point out that China has not only become the world’s largest gold producer, but also its largest BUYER, recently surpassing India.  Official estimates place Chinese gold purchases in 2012 at around 800 tons; an astonishing increase in their stockpile. 

The U.S. and the Federal Reserve can’t even deliver gold it is supposed to be holding for others, including Germany.

China has also recently quadrupled imports of rice and tripled wheat and corn imports in only one year.  Why?  Again, I ask, what do they know that we are not being told?

As I have stated for many years, China is being groomed as an alternative economic engine in opposition to the U.S., and that this will lead to an eventual dump by them of the Greenback.  This scenario is not only based on my opinion, it has also been spoken of openly by elitist financiers, including George Soros:

This past month, the same plan has been reiterated by Zhu Min, the deputy managing director of the IMF.  In his statement, he proclaimed that the shift by China into a more consumer based system had been successful, and that the Yuan or RMB, was on the way to becoming a world reserve currency:

I believe that the moment for the epic changeover, and all the political and financial conflict that comes with it, has begun…

It has been announced this week that China surpassed the U.S. for the first time ever as the number one trading power in the world:

U.S. exports and imports last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion. China had a $231.1 billion annual trade surplus while the U.S. had a trade deficit of $727.9 billion:

“It is remarkable that an economy that is only a fraction of the size of the U.S. economy has a larger trading volume,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail. “The surpassing of the U.S. is not because of a substantially undervalued currency that has led to an export boom,” said Lardy, noting that Chinese imports have grown more rapidly than exports since 2007.”

“According to O’Neill (Goldman Sachs Jim O’Neill), the trade figures underscore the need to draw China further into the global financial and trading architecture that the U.S. helped create.

“One way or another we have to get China more involved in the global organizations of today and the future despite some of their own reluctance,” O’Neill said, mentioning China’s inclusion in the International Monetary Fund’s Special Drawing Rights currency basket. “To not have China more symbolically and more importantly actually central to all these things is just increasingly silly.”

For those who are still not aware of why this is such a big deal, it is essentially a turning point moment in global trade.  There is no doubt that China will now be inducted into the SDR, and that their importance as a trade and consumption center will quickly lead to a move away from the dollar.  To put it simply, the dollar is going to lose its world reserve status VERY soon.  Many will cheer this change as necessary progress towards a more “globally conscious” economic system.  However, it’s not that simple.  Total centralization is first and foremost the dream of idiots, and in any mutation (or amputation) there is always considerable pain involved.  The proponents of this “New World Order” (their words, not mine) seem to have placed the U.S. squarely in their crosshairs as the primary recipient of this fiscal pain.

In my early analysis, I felt it possible that Japan would be inducted willingly into the new ASEAN trading bloc and that they would swiftly fall in line with a dump of the dollar, mainly because their export markets were suffering greatly due to the decline in American purchases.  Now it appears that Japan has not been as pliable as the globalists wanted, and so, a war may be on the table in the Pacific.

Rhetoric in Chinese newspapers has been very heated and provocative, and the tensions surrounding the Senkaku/Diaoyu Islands is reaching a boiling point.  The two countries have done everything so far EXCEPT shoot at each other, and that will be happening in due course now that China is allegedly locking offensive radar onto Japanese ships.  Even Chinese films released in the past two years have been soaked with anti-Japan propaganda, most of them usually set during WWII around the brutal invasion and subjugation by the Japanese in Chinese provinces.

The recipe is one of inevitable disaster, with the U.S. at the center of a boiling pot.  As I pointed in my last economic piece, we must now look to events rather than numbers to gain insight into where we are headed.  The time has come.  China is nearly ready for IMF inclusion.  Volatility around the world is high.  Our government has a final decision to make on the Fiscal Cliff in March, not to mention the sudden push for possible gun registration and confiscation.  My instincts tell me that so many explosive aspects coalescing together at the same tenuous moment is not a coincidence.  The next few months call for hyper-vigilance and every ounce of energy we can muster to educate as many people as possible in as short a time as possible.

I say again, China has surpassed the U.S. in global trade.  A drop of the dollar is the obvious next step…

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Karlus's picture

Well isnt that special

caconhma's picture

20 years ago, working in the Bay Area, CA, I met and made friends with many American's Chinese. From them I heard again and again: We Chinese the most nationalistic people in the entire world.

My regional manager told me: Never try to sell anything to Chinese unless you are a single source of these products. Do not waste your time trying to do stupid things. In a few years later, he became The Principal Financial Ex. VP.


jeff montanye's picture

should have waited until last year to shorten the maturity of their u.s. treasury portfolio though.

nicoacademia's picture

so 2019? big war in my backyard?


Japan is a weak country.


i'm sure China will find a way to bring it to its knees without invoking war in this region.


Granted china will be able to wipe most of SEA off easily and access even more resources(like japan once tried to achieve).


but being here. i guess i wouldn't want war here. i like to maintain this lifestyle of surfing twitter and zerohedge. you know?

reader2010's picture

Does that mean the Chinese people get more happiness from the fact?

TheFourthStooge-ing's picture


Does that mean the Chinese people get more happiness from the fact?

Observations on Chinese citizenism encompasses hundred of millions of people.

The trading opportunities reported and exploited by merchants is built on proclaiming a fact not corresponding with neolithic hunter/gatherer level. So back to Smith and his famous argument. I wonder who is right now, the guro of US citizen economics or his opponents?

The difference between generalizing on general ground and generalizing on singular ground being rooted in a no evidence ground.

Superior ground... Yes, sure.

Nothing like a humanity age long old adage as Chinese citizenism citizens who have blobbed up while ambitioning to become a bigger version through their fabled past thingy foolish association would like to be.

Funnily enough, Chinese Communautist Party groups are the undivided entity in Chinese citizenism. For Party members, the world is their roadside. This old adage is not even that old considered how old adages are usually old.

Regards the 'distant' past, simply reading how Tibet was opened to Chinese citizenism demand for slave trade instructs.

As to the Chinese people get more happiness? Emotional appeal to authority is built on proclaiming a fact. So for Chinese citizenism citizens, by traditional Chinese citizenism expostulatory protocols, one saying so makes it so, so it is so with vigourous endeavorings.

Have not checked if it is true.

For the rest of Chineses, Tibetans, Mongolians, and others I wish good luck to try to beat that. They are going to display imagination...

reader2010's picture

What is your definition of happiness? Owning some modern technology tools, such as mobile phones, iPads, automobiles, can give you happiness?  Or we should revisit the definition of happiness defined in the Enlightenment? Does living in a just and not more unequal society make people feel less happy? Perhaps the people living in Beijing feel much greater degree of happiness with their great air quality?

DanDaley's picture

Reminds me of one of those old WWII movies where the Japanese soldier screams out in the night, "American die!" Only this time it's the Chinese.

q99x2's picture

The Chinese are susposed to run the US and Europe and the Globalists are susposed to kick back in private cities and control the world.

But the Chinese know better they will kill the globalists first chance they get. Maybe one by one in the courtyards. They have a decent track record with banksters and money changers.

Geithner still looks more like the human ancestor from 65 million years ago than he does the Chinese.

Ghordius's picture

without taking any merit from your statement: this word, "Globalist"

currently it's being used only in the US

in your definition it seems to denote also a number of what the article called "elitist financiers", who "kick back in private cities and control the world"

many use though the word more for organizations like the IMF, the NATO, ASEAN, WTO,  and the UNO

illdefined - used only by certain media - and very suggestive, perhaps because it's nebulous

at the moment nothing much more than "them"

nightshiftsucks's picture

Who believes anything that China say's ?

Atomizer's picture

Thanks Tyler. At least the message is getting out. Now we sit back and watch the three branches of US GOVERNMENT. The weasels will be easy to spot. 

lunaticfringe's picture

Four branches.The unelected FED. Fify.

markettime's picture

Call in all of the debt, make your enemies devalue thier currency to pay thier bills. Then announce that you have covered your currency with hard assets and that you will not trade with anyone who hasn't covered theirs. The race to the top would begin and we would see who has been swimming without a bathing suit. 

post turtle saver's picture

Finance is a gun. Politics is knowing when to pull the trigger.

Rainman's picture the 1980s Japan Inc. was supposed to displace USSA as the world's economic superpower by 2010. I'm confused.


zerozulu's picture

Yes they were. They were also thinking to replace US$ with JPY as world reserve currency. Toyota was thinking to replace Mercedes Benz. But the dream remained a dream.

1. inadequate houses to live

2. not enough food to eat

3. undeveloped  language to speak (only two tense, past and present)

4. third world army to protect

5. coward politicians

yogibear's picture

The way China can win without firing a shot is to bring down the US economically.

Time is doing this.

The US outsourced it's manufacturing and technology to China.

All the US has left is a saturation of debt.

Soon the US won't be able to afford it's military. 

CheapBastard's picture

This must mean Moar War. The Petrodollar must be saved at all costs from what I am seeing.

PUD's picture

This article is just more confirmation of the stupidity and folly of humankind. On a planet so small as ours, for a people to be pitting themselves against each other, is nothing short of madness. The competitive system of capitalism, the fostering of nationalism, the primitive notions of race and religion are as entrenched as ever and the results will be the same as they have throughout history...bloodshed.

A sane species would be moving towards a unified world not trading blocs, towards co-operation not one up manship, toward preservation and sustainability not introducing billions more to the joys of mass consumerism. A sane species would not covet a yellow metal, have weapons manufacturing a principal foundation of economies and would not be constantly seeking to prosper at someone elses expense. 

We are doomed but not because of the fed or trade or currency wars...they are all symptoms of the disease. The fatal demise of us all is this pathological desire to hoard, to thrive while others suffer, to press barbaric ideologies on to the unwilling and the tenacious hold bronze age religion still has upon the human consciousness.

PUD's picture

Don't down arrow my unless you have something of value and insight coming from your pie hole to challenge me

imapopulistnow's picture

Here'e an insight:  You sound like Ted Kaczynski

Paladin en passant's picture

This is a capitalist investment site, not a religious soapbox, you pud.

PUD's picture

No it is not. It is as much a philosophical site as anything else. There is as much geo political blather here as there is stock market news. It is as much a cultural site as it is a gambling site.

Cathartes Aura's picture

from the ZeroHedge "manifesto" at the top of your page:

our mission:

  • to widen the scope of financial, economic and political information available to the professional investing public.
  • to skeptically examine and, where necessary, attack the flaccid institution that financial journalism has become.
  • to liberate oppressed knowledge.
  • to provide analysis uninhibited by political constraint.
  • to facilitate information's unending quest for freedom.
Karlus's picture

You, Beta-male, are the product of countless generations of conflict. You attempt to deny (you would say trancend) that what made you what you are today.

The system works. It produces humans that strive to innovate, learn, master and reproduce.

Just because you want to be cool like Anderson Cooper does not make you advanced. My spawn will pwn yours if you even have the dumb sense to reproduce. To the victor goes the spoils (and the writing of history)

PUD's picture

There are no "victors" in the 21st century fool. There are no victors when the climate itself gets altered and the planet teems with weapons of mass destruction.

Lord Of Finance's picture

Your sentiment on "religion" is too general/labeling. The problem is not so much the religion, but its hypocritical leadership. That is the way it has always been and always will. The problem is not religion itself, but the established corrupt leadership.


   That is the other main theme of the new testament. Jesus came not to neccesarily condemn the sinner but to condemn the hiarchial establishment. He forgave the adulteress and even the guards who nailed him to the cross, but he had nothing but bitter contempt and condemnation for the scribes and pharasees who were the hypocritical and corrupt religious establishment.


The "other" message is that these things have always been this way and will pass, but we are eternal with immortal souls and our souls need nourishment, so dont become discouraged, bitter and lose faith because of the very bad example of the religious establishment.


suteibu's picture

Some people have the hubris to believe that humans are somehow exempt from evolution.  In every other organism on the planet, the strongest always survive.  What the Utopians want is to stop the evolutionary process in humanity and justify it in their own minds by their belief that we have reached the pinnacle of evolution. [edit to add] ...or that they believe they are somehow qualified to guide the future evolution of humanity.

medium giraffe's picture

Nah, the system just produces consumers and wage slaves, masters and soldiers.  Built in obsolecence retards technological progress, the education systems of the world fail to promote independent and critical thought and our foods poison us.  The system stands in the way of progress, it's amazing that we've come as far as we have considering.  Until you get rid of Mr Petrodollar it's staying that way.   Sorry fella....

Sean7k's picture

You better find another species, because you clearly have no understanding of humans. 

Hoarding is necessary for security, it is what promises future survival. Thriving is merely a measure of the fitness of the species. We require it to survive- it is what makes us stronger.

People save gold because it has value and like many other commodities, helps guarantee our future. 

To relieve the FED or government of responsibility is the ultimate folly. They rule through coercion, therefore their ethics must be judged and if found wanting- THEY ARE THE FOCUS OF BLAME.

You cannot unify people because they are not homogenous. They are INDIVIDUALS. Cooperation will only be rewarded if it produces a GAIN. 

Your socialist crap is no different from the bronze age religion you deride. 

Liberty with responsibility is the only promise worth living for.

PUD's picture

To believe your tripe is to admit that you are incapable of rational thinking. That you are incapable of seeing the advantages of using reason. That you are incapable of rising above your dna programing despite science, knowledge and your own ultimate well being.

Sean7k's picture

Why? Because my reasoning doesn't accept yours? Because your reasoning is somehow superior to any other, even if you are incapable of providing a defense of your reasoning? 

You think your DNA programming can be overridden by desire? Where did you study science? We don't even understand our DNA programming, but YOU do? 

What a piker...

PUD's picture

Are you blind? How many nations now are involved in competitive devaluations of their money? Each of them exercising their dna programing to gather resources and trump their neighbor. Tell me how that system is superior to one that would unify currency, allocate resources, break down nationalism and racism...

Sean7k's picture

I never said this system is superior. I implied that your idea of benign socialism is naive and moronic. We have competitive devaluations because we have fiat currencies that are not linked to stable commodities (like gold). 

When you unify currency, allocate resources and breakdown nationalism you socialistic totalitarianism. This is because the "good guys" never get to be in charge. It is because you destroy the market mechanism that allows for the efficient allocation of resources. 

I am always amazed when people fail to see this historic fact. Historical might want to get some glasses.

suteibu's picture

The problem with your idea of unity is always "who" decides.  You?  Obama? Xi?  There is no messiah who is capable of unifying the planet except by force of arms.  Ultimately, that is where you path to Utopia leads.  Is that really what you want?

PeeramidIdeologies's picture

Leadership is not about control. It is assisting those around you to reach their full potential. Of course people would need to be motivated to presue their natural inclinations to the greater good, so utopia isn't really in the cards...

suteibu's picture

Test your leadership definition against the current world "leaders" and show me who passes the "not about control" ideal.

PeeramidIdeologies's picture

I don't consider them leaders. Do you? They seem more like a bunch of crotchety old bastards, who missed the boat on the true value of life, wouldn't you say?

suteibu's picture

Well, that's the point.  No one is in a position to lead this world by your definition.  And, yet, many people who want a unified world (socialists and Utopians) don't seem to have a problem with our current "leaders" taking us in that direction. 

PeeramidIdeologies's picture

That's why a change in ideals is needed here. I see you mentioned evolution above. I believe there is a strong case for the argument that we stopped evolving a long time ago. If indeed we ever did. Either way, we stopped needing to evolve when we became able to manipulate our environment. That was a long time ago. We have since become our own worst enemy, always infighting, never working towards balance and sustainability. We pride ourselves in being superior beings on this planet, with the brains to solve all our issues. Yet we keep making the same mistakes. What's the next stage for mankind? A step forward or another bout of snatch and grab?

suteibu's picture

We (our generations) are but a blip in human history and irrelevant to the evolution of humanity.  To assume that we even know what evolution is is to be closed-minded and narcissistic.  To suggest that we can direct the further evolution of humanity by dictate limits our ability to evolve because we have no idea what the pinnacle of our species is or can be.  Without a goal, direction does more harm than good.  We haven't learned anything about ourselves even with all of the documented history to review as evidenced by our current failed attempt to unify the planet.  All such attempts in the past have failed so why do we force it now when the results are mostly destructive?

PeeramidIdeologies's picture

I see that we still use the same mathematics, astrology, science, religion, in fact all of the pillars of society today were learnt thousands of years ago. Why did we stop there? We know this structure doesn't work. To be complacent at this stage is to be destructive, which is too name this the pinnacle of our species. To admit now that because all efforts have failed in the past, all efforts will fail in the future, is rather pessimistic. Although realistic...

On that note

A giant leap for man began with a small step ~ T.K.

Anusocracy's picture

The zero-sum game of the animal world is the modus operandi of government. When man departed from nature's zero-sum economics and created positive-sum economics through plant and animal husbandry - applying intelligence to nature - government and its zero-sum economics, being biologically based, was not amenable to man's increasing intelligence.

It still is not, and we are still suffering from all the grief government causes.


suteibu's picture

Recorded history is insignificant to evolution.  The mistake is to take the past 5000 years and think we understand ourselves.  We need more da Vincis and Einsteins and fewer kings and would-be kings who think they know better than those of the past.

Anusocracy's picture


More people who create, and far fewer who expropriate.

suteibu's picture

And people are not the problem.  Most people get along fine with others out of their desire for self-preservation and the natural inclination to find commonality in their society.  It is always the "leaders" who cause the problems.  Ergo, the less power we give to the "leaders," the less turmoil in life.  Decentralization, not globalism, is the best path for peace and security.