GOROOT – Listening to China’s Trade Journey – In the past three decades, China’s economy has truly shown its might. In the mid-1990s and 2000s, China’s gross domestic product (GDP) grew several times over 15%.
Not only that, but China’s trade performance with the world has also shown a sharp increase in the last 2 decades. It peaked in the mid-2000s when trade performance contributed to 64% of China’s national GDP. This is in line with the rate of realization of foreign investment in China which is increasing at an insane rate.
China’s skyrocketing economic growth eventually gave rise to many new billionaires. Some names are even perched on the list of the world’s richest people.
Seeing the rich getting richer, President Xi Jinping finally devised a new policy called ‘Joint Prosperity’. Actually, this term is not new. In the 1950s, Mao Zedong had launched a campaign about economic equity.
This new policy also targets giant Chinese companies. The government wants to narrow the gap in welfare inequality in China.
So what is China’s or China Trade’s trade journey like? Big Alpha summed it up for you.
1. Beginning with China’s economic reforms in 1978
China’s economic dominance over the world today took a long time to build. China began reforming its economic system in 1978.
The Chinese government at that time began to introduce socialist policies with Chinese characteristics. Economic reform was carried out in 2 stages. First, the period from 1970 to 1980 by starting to develop agriculture, opened up foreign investment and granted business permits in the tourism sector.
While the second phase, from the late 1980s to the 1990s, involved privatization, lifting of price controls, and improving regulations in many economic sectors. This also makes the private sector grow rapidly to reach 70% of China’s GDP in 2005.
China’s long journey of economic reform is indeed a success. The economy is indeed advancing rapidly and is accompanied by a broad absorption of labor. However, a new PR appeared. Inequality aka the income gap is getting wider. This illustrates that the richest group in China is getting richer leaving the poor.
2. China overtakes Japan
In 2010, China officially replaced Japan’s position as the country with the world’s second-largest economy. This position still holds up to this day. Many economists also believe that China will soon overtake the United States (US) in 2030 as the country with the world’s strongest economy.
3. Abundant capital
China’s success in reforming its economy is not solely based on financial capital. China mainly has capital in the form of abundant labor. This very large population is used by the government to supply the industry there. The wages of labor in China are also known to be cheap so that it is profitable for the industry.
China has also succeeded in attracting many foreign investors to set up its factory network there. Various products, such as mobile phones to toys are produced in China.
4. Trade war with the United States
The trend of strengthening China’s economy seems to have made the United States, which has been on the throne of the country with the largest economy, also become nervous. Relations between the United States and China have become increasingly heated in the era of Donald Trump’s leadership. The two of them were involved in a trade war that peaked in 2019 and then impacted the global economy.
The United States (US) does not accept that its trade balance is always in deficit with China. Finally, protectionist measures were taken to restore their trade performance with China.
Trump decided to increase import duties on solar panels and washing machines by 30% and 20%, respectively. Furthermore, the US imposes tariffs on steel up to 15% and 10% on aluminum.
China retaliated by raising tariffs on pork and aluminum scrap products by 25%. Beijing imposed 15% tariffs on 120 US commodities.
Reciprocal action ensued. The United States even banned Chinese telecommunications companies from buying US components for 7 years. This has an impact on Huawei products, the king of Chinese electronic components cannot embed Google Mobile Service (GMS) services in all their gadget products.
Since then, the dynamics of the trade war have developed. A number of parties were also involved as mediators. However, the trade war between the US and China continues to this day.
Experts also believe the United States will continue to harass China. The reason is still as in the beginning, the US is worried about China’s development which continues to erode US dominance in world politics and defense