Example Of Forex Fundamentals Chinas Economy Overview

In recent years there is one theme that persistently has occupied economics reports all over the world, that theme is China. The major emerging industrial power in today's world, with an economy that has been growing in giant steps over the last decade and the first half of this.Just as an example, last December (2005), China's National Bureau of Statistics officially added almost a fifth to the estimated size of the Chinese economy. With this latest revision, China's gross domestic product (GDP) was over $US2.

1 trillion in 2005, making China the world's sixth largest economy. If we consider an annual economic growth of more than 9 percent, which is a really big number in economics terms, it is likely that China will overtake France and Britain in 2006 to become the world's fourth largest economy after the US, Japan and Germany.Until the early 80s, China had remained a largely agrarian and self-sufficient economy. But today with the increasing industrialization, the country has taken over a title given earlier to Britain's in the nineteenth century, this title was, "the workshop of the world". No wonder most of the world's toys and shoes together with large portions of its textiles and home electrical appliances are now manufactured in China. The country is also becoming a major consumer of raw materials and energy.

In 2004, China consumed 7.4 percent of the world's crude oil, 31 percent of its coal, 30 percent of its iron ore, 27 percent of its rolled steel, 25 percent of its alumina and 40 percent of its cement. Now you know why commodities are increasing their prices every year.Though China's industrialization model is different to that followed by today's major industrial countries.

Its model is mainly driven by transnational corporations, which use the country as a giant export-processing zone. This is bound up with another economic phenomenon of our time; the rise of gigantic discount retailers in Western markets, particularly in the US. These retailers, with their extensive logistic networks and outlets, provide an ideal channel for mass producers of cheap goods based in China. And consequently fuel the economic growth of the country.The major example of these discount retailers is in the U.

S; where not many years ago the symbol of American capitalism was General Motors, but now it is Wal-Mart; the world's largest retail company. Wal-Mart's sourcing from China accounted for more than 10 percent of all US imports from China in 2002. I should mention that Chinese exports have been a major factor in the growing US trade deficit, which was likely to exceed $200 billion with China last year.The economic trend is similar with Europe.

The Europe(EU)-China trade has increased more than 40-fold since 1978, making of China Europe's second largest trade partner after the US. The EU has gone from a trade surplus with China in early 1980s to a deficit of ?78 billion in 2004. According to the Chinese Ministry of Commerce, bilateral trade in the first 11 months in 2005 reached $US196.78 billion?an increase of 23.6 percent from the previous year.With this short overview it is clear that Chinese economy is gaining a primordial position in today world's economy but it is also clear that sooner or later the big deficits incurred by its trading partners will have an adverse effect in China's currency value and hence in it's still growing economy.

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By: Adrian Pablo