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China still stands as world's largest exporter, however its trade surplus is too concentrated on US. This is likely to pose problems for World's second largest economy going ahead.
It would be fair to say that China is too dependent on US for its exports, forex reserve and economic expansion and it would prove costly in the longer run.
US facing upcoming election and expect the new candidates make free US from Chinese imports as one of their key foreign policy agenda. That is because US has large trade deficit and most of it is to Chinese courtesy. Geo-politics and China's alliance with Russia is likely to play key role in the new policies.
Expect more US and China trade battles at WTO. Going ahead, US lawmakers are likely to pursue policies to close the gap in trade balance.
Most of that will not be achieved through increase in exports to China, rather than shift of imports to Latin America and Europe. Weaker Euro will surely play a role in this.
Key statistics -
The chart attached, details US exports, imports and Trade balance.
- It is not difficult to visualize, how rapidly Chinese yearly exports (goods) to US rose from $100 billion in 2000 to $466 billion by end of 2014. There has been just one year (2009), when the exports actually shrank.
- In similar fashion, annual trade balance (goods) rose from $83 billion in 2000 to $343 billion by end of 2014.
If China fails to diversify its export or even reform its economy from an export oriented once to domestic consumption based, it faces risks of US import diversification going ahead.
