China is one of the fastest growing countries in the world and many predict that China will rise as the future super power of the world by overcoming United States. However, a closer look at the economies of both the countries suggests that there is a lot of foreign trade taking place between two countries. There is a very extensive presence of US companies within China potentially for a reason of availing low cost production facilities in China. The goods produced and exported to US by China exceeded $280B during 2006 and this quantum is increasing with the passage of time.
(Workman, 2007). Similarly, Chinese imports from US accounts for more than $50 B suggesting that the mutual trade between two countries is increasingly steadily over the period of time. The quantum of trade contains different items which are mutually traded between two countries. The list of products exported from China to US include computer accessories, toys, sport equipments and goods, furniture for household use, telecommunication equipments, footwear, cotton clothing , DVD Players, computer, zinc, nickel, lumber etc.
The above is list of few of the major goods which are being exported from China to US whereas US tend to export semi- conductors, soybeans, Aircrafts for civilian use, copper, computer accessories etc. The above trade also suggests that there is growing trade between two countries in electronic goods as China, due to its traditional low cost superiority offer an environment which is less costly with almost all facilities and infrastructure in place to kick start manufacturing activities on more modern footings.
Most of US companies are relocating their manufacturing facilities to US to take that advantage. (Shijian & Lijun, 2006). Question#2 It is often argued that the trade between China and US has benefited both the countries especially US as it has been able to save billions of dollars of its consumers due to low cost-high quality products being imported from China besides getting an opportunity to create 4 million new jobs only because of its trade ties with China. (Ruogu, 2008). However, despite these benefits, there are still some issues related with financing trade between two countries.
It is believed that trade between two countries is mainly financed through an indirect way of remitting the investment proceeds back and forth from China to US and US to China therefore as such there is more reliance being put on financing the trade through the equity sources of the individual companies which are opening up their manufacturing facilities in countries. However, there are still imbalances between trade financing of two countries as many believe that it is US who have benefited more than China because of more demand of US currency in China.
Weaker dollar against major currencies itself is one of the basic means of financing of trade between two countries because US tend to benefit more by enjoying capital gains on investments made in China. China and US also established “The Mid-Term Loan Agreement of Sovereign-Based Financing Cooperation —– signed and executed by the ExIm banks of both sides” (Ruogu, 2008). Thus there is major emphasis on creating institutional support for financing the trade between two countries.
1. Bibliography 2. Ruogu, L. (2008, May 09). Real issues in China-US trade imbalance. Retrieved November 08, 2008, from China Daily: http://www. chinadaily. com. cn/china/2008-05/09/content_6672186. htm 3. Shijian, Z. , & Lijun, W. (2006, April 18). China, US complementary in trade. Retrieved November 08, 2008, from China Daily: http://chinadaily. com. cn/china/2006-04/18/content_570030. htm 4. Workman, D. (2007, June 28). Top Chinese Exports & Imports. Retrieved November 08, 2008, from http://internationaltrade. suite101. com: http://internationaltrade. suite101. com/article. cfm/top_chinese_exports_imports