The data is in for China’s economy in the first half of 2017 and there are a few things worth noting: First, China’s economy grew more than expected. Second, China’s overall trade with North Korea has risen but their imports from the country have fallen. Third, China is trading (importing and exporting) more than expected and widened its trade surplus over the US. The last two in particular might widen the rift between China and the US.

The Chinese government had set a growth target of 6.5 percent for 2017 – one of the country’s lowest growth targets in over two decades. In the first quarter of 2017 China grew at 6.9 percent and now economists forecast a growth of 6.6 percent by the end of 2017. That may not seem like a lot but with an economy like China’s even .1 percent of growth can mean a lot. How much? China’s total GDP (PPP) as of 2015 was 19.815 trillion, so .1 percent of that is 198.15 billion dollars. If that still seems small, 198.15 billion dollars is more than most countries’ expected GDP for 2017. One tenth of one percentage point of growth in China adds more to the amount of production to the global economy than Greece’s entire economy is projected to in one entire year.*

Even .1 percent can matter a lot. It also matters both to the international marketplace and to China’s government. In the world market many businesses and countries rely in some part on Chinese growth. In Beijing leaders agreed to slow down China’s economy to try and avoid recklessly building an economic bubble that could have disastrous effects the world over if it burst. In some ways the higher growth is a good sign: people across the world are buying and selling, economies are rebounding. In other ways it is a bad sign: Beijing may be having trouble reining in reckless growth that is bad for long-term stability.

Much of this growth comes from a surprising rise in China’s trade, which has some big political side-effects. The first comes from North Korea, since China’s trade with them rose 10.5 percent even in the face of UN sanctions and pressure from the US. China seems about as fed-up with North Korea as the UN or the US and it has shown that frustration. Despite the total growth, China did import 13 percent ($880 million) less than it had before and it did follow through with a promise to stop importing any coal from North Korea. China’s head of customs Huang Songping argued that China followed the UN sanctions on trade with North Korea because the goods traded were not on the UN’s embargo list. Most of the trade growth came from exports which grew 29.1 percent ($1.67 billion) and Huang argued came from textiles and other non-military, non-industrial goods.

Another big source of North Korean and Chinese trade is iron ore, something China wants for industry and North Korea has in abundance and quality. Beijing, already pressured internally and externally to move to cleaner fuel and having plenty of coal sources, can refuse North Korean coal; refusing iron ore is harder. All of this naturally annoys US President Donald Trump, who met Xi Jinping at Mar-A-Lago presumably to discuss the issue. Yet it is simply not in China’s interest to pressure North Korea to the point where its regime crumbles, since China would have to take in a great deal of refugees and deal with potentially an unstable state or US troops near their border.

President Trump may have another problem in the fact that China’s trade surplus against the US rose by about $3 billion. While the increase is fairly substantial, in terms of the global economy it is fairly small. That said, Trump promised to erase the trade deficit with China and data shows it just increased to its highest point in ten months. If President Trump truly wants the US to export more to China and import less from them then he has a tough task ahead of him. China hardly seems to be slowing down.

Notes on the numbers

*Forgive me, I am about to talk about statistics. Feel free to turn away here, but if you do not totally know terms like GDP and GDP PPP and why we use them then this post-script is more important to read than the actual article. Stats are crucial to understanding most articles like these.

First, if you don’t know or remember what GDP is, watch this minute long video from EuroNews as a refresher. You will find (usually real, not nominal) GDP referenced and used pretty much everywhere as a 1:1 stand-in for a country’s economic strength, but it is actually a complex, imperfect statistic that has its critics.

In this article I use real GDP PPP (Gross Domestic Product Purchasing Power Parity, just to be sure you know the acronym and will never want to see it spelled out again). You might see many other places use plain old GDP. Regular GDP calculates production in form of the value of goods sold in the US dollar, but PPP tries to calculate the value goods would have in their own currency and market. For developing economies in particular, this can make a massive difference. China’s GDP is 10.87 trillion while the GDP PPP is 19.815 trillion – nearly double.

In China 1 US dollar is about 6 Chinese Yuan and 6 Chinese Yuan can often buy more and go further than 1 dollar could. In China about 12 yuan – 2 dollars – can get a person 12 trips on the bus in some Chinese cities but in the US 2 dollars would not buy one trip on many cities’ buses during peak fair times. That means that when China is producing 1,000 US dollars worth of goods it is usually producing more goods than 1,000 US dollars would make in the US. Ideally PPP adjusts for this difference and shows a more accurate representation of what China truly makes. The main downside is that PPP is not easy to calculate. There are entire organizations and jobs dedicated just to finding out how much stuff countries really make and how much that stuff is really worth. I choose PPP over GDP because even with the difficulties calculating it I think it is a much more honest portrayal of how much a country produces.

 

China shipping line Xin Chang Shu | Photo by Beat Strasser, CC 2.0 courtesy of Wikimedia commons.

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