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Direction of Trade

Andrew Papadimos
 

This articles is from Chinese Business Center

China's distribution of foreign trade is focused primarily upon the Capitalist countries. Obviously, this is because it is mainly the Capitalist countries that have the funds and technology which China needs for its industrialisation - the most notable examples being Japan, the US and Hong Kong. Along the way to industrialisation, the PRC has established trading contacts with most countries - regardless of ideology. During the 1970s and most of the PRC's period of economic reforms until the mid-1980s, Japan has remained the PRC's largest trading partner. Since then, the PRC's major trading partner has become Hong Kong - the major reason being that the PRC is Hong Kong's major source of food. Hong Kong also represents the PRC's major link for indirect exports, as well as the point of sale for goods processed or assembled in the PRC - including textiles and light industrial goods.

Graph 5 illustrates the immense change in the significance in Hong Kong as a market for the PRC's exports. While purchasing an already significant 24.0% of the PRC's total exports in 1976, Hong Kong now purchases 41.8% of all PRC exports. Hong Kong has therefore been transformed into a key centre for the PRC's trade with the rest of the world, and as such is regarded as the 'gateway to China'. Also becoming more important to the PRC as an export market has been the US. Virtually insignificant in the early 1970s - constituting only 2.9% of its export market - the US has today become the PRC's third largest export market - purchasing 11.8% of its total exports. The rise in importance of Hong Kong and the US has meant the decline in importance of all other markets - including Japan - which has decreased its standing from 36.5% in 1976 to 22.5% in 1989.

Graph 6 illustrates once again the significance of Hong Kong to the PRC's trade. Apart from being the PRC's major re-export centre, Hong Kong also represents a gateway into the PRC for many of its imports - especially Japanese, Taiwanese and South Korean produced goods consisting mainly of televisions, home appliances, video recorders and other high-end manufactures. Also, the PRC's establishment of the Shenzhen Special Economic Zone (SEZ) just across the boarder from Hong Kong has encouraged even more cross-boarder trade.

In summary, the PRC's foreign trade today is dominated largely by Hong Kong, Japan and the US - together constituting 58.8% of the PRC's total trade in 1989 after constituting 43.9% in 1976. The major benefactors in the PRC's trade since the mid 1970s have been Hong Kong and the US. While Japan still remains the PRC's second largest trading partner overall, it is a much less significant partner today -standing at 19.93% - than it was in 1976 - 27.54%.

Other losers in the PRC's market place include Western Europe - falling from 24.0% in 1976 to 10.8% in 1989, Canada - falling from 2.77% in 1976 to 1.33% in 1989, and Australia - falling from almost 3.5% in 1976 to 1.7% in 1989. Rather than diversifying its markets - as has Taiwan - the PRC has been concentrating its markets on its three major trading partners.

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