Contributor Article:
China and trading are inseparable. Their history will show you how China and trade are integrated with each other. China entered into the globalized environment almost thirty years go and since then has been one of the most influential countries in the world. This is because the centralized government of China helps manufacturers in setting up processes to produce things which in turn they will sell to the world which is hungry for cheap products. And in turn, the government uses the income they get to pay for their education and equipment in China, things that would develop the whole country of China. China is popular in producing low cost products that is because they have low cost labor.
Trade surplus is defined as a positive balance of trade where the exports exceed the imports of the country. And to be able to understand the trade surplus in Chin, let’s cross reference it with the US. If you compare Yuan to US Dollars, you can easily see the undervaluation of the Yuan, and that would result into at least two or three percent trade surplus.
The three main reasons for the Chinese surplus are the low cost labor, less consumer and the undervaluation of their currency.
The trade surplus between china and the US has created a co-dependency, and the dependency ratio of this relationship is the major concern of China. And you can get a better picture by now who has the greater dependency ratio. In China, the major work force depends on their agriculture and lives in the rural areas, which leads to low consumer spending. Compare that in the US where the consumer spending accounts is almost 70 percent of the GDP whereas in China, it is about 50 to 60 percent. Another two reason s added to the China surplus, low dependency and low consumer spending.
The Chinese government had made some changes in the value of the Yuan but it will not solve the trade imbalance in China. Major changes should be implemented to correct this and moderate its Trade Surplus. But the government doesn’t seem concern about that and until it takes seriously the reevaluation of its currency, it will be difficult for them to move into moderate trade surplus.
About the Author
Brendan Elias and Alex Ryan have been teaching individuals how to import from China in their free 30 day video training series. Visit our website to sign up to this free training. You will discover how to source products from China, contact factories, negotiate to get the best price and much much more. http://chinaimportformula.com.au/
