Unit 2 Macro: Exporting to the Booming Chinese Economy

Before you read this blog please have a look at another blog written by our good friend Mark Johnston from New Zealand. Students of China and the US economy will find it fascinating!

There are good grounds for no longer calling China an emerging economy - it has arrived! The multiple significance of the rapidly-growing Chinese economy is plain for all to see but for Britain, only a small percentage of our exports of goods and services go there and this must change if Britain is to fully engage with and benefit from the rising might of the Chinese consumer. This article from the Daily Mirror provides a non-technical but clear explanation of the growing purchasing power of newly wealth Chinese, thousands of whom are flocking to western shopping malls to buy premium brands. Chinese foreign exchange reserves are also being used to buy up real assets - last week we heard that a Chinese sovereign wealth fund is set to buy nearly 9% of Thames Water.

As things stand Britain’s export businesses are not making the in-roads into fast-growing Asian, African and Latin American countries that is needed to kick-start the recovery. Too many of our exports continue to flow to debt-constrained economies where growth is weak and likely to remain so for some time to come. Read The Economist (Jan 2012) Exports are growing, but too slowly to rescue the economy

Data from Timetric.

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BoP-consistent: China: Exports: SA : quarterly from Timetric

Britain’s monthly balance of trade with China is shown in the chart below.

Data from Timetric.

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UK Balance of Trade with China (£m, monthly) from Timetric

We do have some British exporting success stories in China - British Aerospace, Rolls-Royce, Burberry to name a few - but simple not enough of them at the moment.