China will probably overtake Germany to become the world’s second-biggest trader next year after the U.S. as the Asian nation’s economy expands and its trade surplus balloons, the World Trade Organization said.
U.S. imports exceeded exports by $783 billion last year, equal to 8 percent of world trade, the WTO calculated in a report published today, making the U.S. more reliant on foreign investment to balance capital flows. Meanwhile, China’s trade surplus surged to a record $23.8 billion last month as imports hit a 15-month low, meaning the U.S. deficit with China will likely exceed last year’s $201.6 billion record by 6 percent.
China is now "a principal market for primary products" and the end of textile quotas at the start of 2005 had the effect of "heightening competition within developing countries," the WTO report said. Despite being a net-fuel importer, China bucked the global trend and saw its exports accelerate, the Geneva-based trade arbiter said.
The volume of goods traded worldwide climbed 6 percent last year, the WTO said. Exports were worth $10.2 trillion while foreign sales of commercial services expanded 10 percent to $2.4 trillion. Growth in exports of telecommunications and computer equipment globally outstripped the rise in manufactured goods exports for the first time in five years in 2005 and higher fuel prices boosted shipments from oil-exporting nations.
Exchange Rates
The yuan has risen 3.1 percent against dollar since China ended a currency peg in July 2005 and allowed it to trade 0.3 percent either side of the dollar on a daily basis. The yuan has dropped 1 percent against the euro in the same period. China also began trade in forwards contracts and introduced foreign- exchange swaps to allow companies to reduce currency risk.
Europe, the globe’s biggest trading region, showed the smallest increase in trade growth of all on the back of the weakest economic expansion. In volume terms, European imports and exports rose 3.5 percent, half the world average.
Germany overtook the U.S. as the world’s biggest exporter in 2003. China, which joined the WTO in 2001, took the No. 3 slot in 2004, up from the ninth position in 1999.
