In Hard Times, China Overtakes Germany as Top Exporter

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China's export volume has overtaken Germany's, despite its exports shrinking for the past 9 consecutive months, now down 20%, year-on-year. China expects the decline to bottom out in the fourth quarter. Whenever the global economy recovers, China's exports are ready to show a rapid and vigorous growth.

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According to the World Trade Organization (WTO), the total export value in dollars for China and Germany in the first half of this year was almost equal, with China slightly ahead. China's GDP first exceeded that of Germany at the beginning of this year.

 

In the first half, China exported goods worth $521.7 billion compared with $521.6 billion for Germany. Chinese Customs statistics come in a bit under the WTO numbers, putting China's exports at $521.5 billion.

 

Although China's new edge is statistically insignificant, it means a lot. After the financial crisis, China's economic influence has definitely increased.

 

WTO Chief Economist Patrick Low calls the race "fierce." In his view, in the second half year, exchange rates may ultimately decide which country will be top exporter. Low said it is difficult to judge which country will win this year or next year given the current situation.

 

Since 2003, Germany has been the world's largest commodity exporter. Some analysts estimate that China's 2009 total export value may exceed that of Germany.

 

Global trade has shrunk in the ongoing financial crisis. Both China's and Germany's exports suffered a similar declines. With its strong export orders, Germany's foreign trade accounts for 47% of its GDP and its economy leads the EU. Germany's economy heavily relies more heavily on exports than that of other European countries.

 

Germany's exports are mainly concentrated in durable and capital goods, such as cars, and machinery, as well as chemicals, far more than in services and consumer goods. When the world economy is in flux, orders for these products can drop like a rock, unlike those for clothes and daily goods that consumers need and use regularly, which make up a large proportion of China's exports.

 

The second quarter showed signs of export recovery for both China and Germany. Germany may well be one of the quickest to rebound in the euro-zone. Data released on August 14 show Germany and France in the lead with positive economic growth, GDPs increasing by 0.3% in the second quarter, beating expectations. Data showed that under the lead of Germany and France, the euro-zone economy may pull out of recession in the third quarter. Economists have raised their GDP growth forecasts for the euro-zone for this year and next.

 

According to recently released German Federal Bureau of Statistics data, Germany's industrial orders increased by 4.5% in June following a 4.4% rise in May. Of that total, domestic orders rose by only 0.2%, while orders from abroad increased by a robust 8.3%.

 

According to data in July, China's foreign trade has also picked up in the second half. Coastal export firms' orders have increased, and in July the trade surplus returned to 100 billion yuan. Benefiting from the timely adjustment of the export tax rebate, China's light industrial products have maintained their global market share. Recently the Ministry of Commerce (MoC) issued a positive forecast for exports in the second half, with rebound in the fourth quarter.

 

If it turns out that exchange rates finally decide who will be the export champion, the recent strengthening of the euro will be no help for German exporters.

 

Although China's share of global trade has expanded, its exporters still suffer. A Ministry of Commerce survey of nearly 2,000 key enterprises reveals that during the first half year, average export profit was 1.5%, down 6.2%, year-on-year.