Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
In 2020, China remained the world’s second-largest economy with a gross domestic product (GDP) of $14.7 trillion, following the United States with a $20.9 trillion GDP, and ahead of Japan with a $5 trillion GDP.
Source: World Bank
China’s economy is larger than those of the next four economies - Japan, Germany, the United Kingdom, and India – combined. China’s largest province, Guangdong, has a nominal GDP larger than Canada’s; the Yangtze river delta, centered around Shanghai, has a GDP roughly the size of Germany’s.
China bucked global trends and posted positive global growth in 2020, albeit at a rate well below recent years at 2.3 percent. Irrespective of the COVID-19 crisis, China’s growth rate has slowed in recent years. The country is facing a shrinking workforce, reforms that reduce debt-fueled growth, mounting provincial debt, and trade turmoil with the United States.
Source: World Bank
U.S. China Trade Relationship
The trade relationship between China and the United States has been long characterized by ongoing trade disputes. This includes intellectual property (IP) theft, forced IP transfer, and myriad market access issues that impede U.S. firms from operating on equal footing with preferred local Chinese firms. U.S. trade policy pushed back in recent years. Actions included tariffs, sanctions, and export controls related to national security and human rights.
In 2020, U.S. exports of goods to China were $125.0 billion, up from 107.9 billion in 2019. Meanwhile, in 2020, U.S. exports of services to China were $40.4 billion, down from $59.4 billion in 2019. Nevertheless, at the current rate, U.S. Census Bureau statistics show that U.S. exports in goods will likely reach nearly $140 billion in 2021.
Source: U.S. Bureau of Economic Analysis
China’s Industrial Policy
China continues to rely upon industrial policy tools, including subsidies, market access restrictions, pressures to transfer technology, and other support for domestic competitors. These policy tools undermine the ability of foreign firms to operate on a level playing field in the Chinese market. Furthermore, the Chinese Communist Party’s control over various economic actors in the market has increased.