Image: E G Pors

Exporting As China Does

Ever since 2009, China has been the world’s largest exporter. Its total exports are equal to just under 20% of its economy. We wonder: Which of the following major economies is closest to China’s level on a percentage basis?

A. Japan
B. United States
C. India
D. World economy
E. Germany

A. Japan is … not correct.

China started to emerge as a major global export powerhouse only in the 1990s. Japan’s path as a strong exporter, which began in the 1960s foreshadowed the global expansion path that China eventually embarked on.

Japan’s share of exports of goods and services to GDP, at 17.6% in 2015 according to the World Bank, is close to China’s level – but it is not the closest one among the major economies. Japan’s 2015 percentage was the highest share the country has reached since 1960. It recorded its lowest export share, at only 8.9% of GDP, in 1995.

In terms of total export sales of goods and services, Japan is the world’s fourth-biggest exporter. It ranks behind China (first place), the United States (second place) and Germany (third place). Japan’s top exports are motor vehicles and electronics.

B. United States is … not correct.

In the United States, the share of exports to GDP reached 12.5% in 2015. Because the country is a continental-size economy with a large internal market, the relative significance of exports as a share of overall U.S. economy is proportionally in the lower range.

Coincidentally, that same argument also explains why the relative significance of exports has also declined in China. As China’s domestic market expands, a larger share of its production will be sold at home, not primarily exported, as was the case in the past.  Exports accounted for as much as 37.2% of China’s GDP as recently as 2006. And while that percentage has declined to 22.1%, China’s total export sales over that same period actually increased by approximately 145% – from $969 billion in 2006 to $2.37 trillion as of 2015.

Even so, the export strength of U.S. firms globally is very significant, at $1.38 trillion in 2015.

The highest export level the U.S. economy has reached since 1960 as a share of the overall economy was 13.6%, which was recorded in 2014. The lowest percentage reached in the same period was 4.8%, which was recorded in 1962.

The major economy where the export share in the national economy is closest to the U.S. is Brazil, whose exports account for 13% of GDP (as of 2015).

C. India is … correct.

India’s share of exports to GDP was 19.2% in 2016. It is thus the major economy where exports are closest to China’s 19.6% figure. (Prior to about 1981, when China’s export rise began, India had actually led China in this indicator.)

India’s export economy includes an unusually large — relative not only to a developing nation, but also to many major developed nations – component of “services” exports, as opposed to exports of physical goods or raw materials.

These modern, high-quality service exports – comparable to those sold by developed economies such as Ireland – include call center services for IT and customer support overseas, as well as low-cost legal document clerical work and computer programming, among other things.

Manufacturing goods for exports from India remain a smaller contributor to GDP and are generally a lower-quality sector than in many other significant developing economies. (However, goods exports, as opposed to service exports, still account for two-thirds of Indian exports.)

D. World economy is … not correct.

International exports worldwide as a share of the global economy stood at 29.4% as of 2015, according to the World Bank.

The highest percentage reached in the period 1960-2015 was 30.7%, recorded in 2008 – before the outbreak of the global financial crisis. The lowest percentage reached in the same period was 11.6%, which was recorded in 1962.

Global exports as a share of world GDP is the same as the share of exports in France’s national economy (29.4%). This figure is more than double the percentage of the United States (12.5%) and slightly higher than that of the United Kingdom (28.1%).

E. Germany is … not correct.

Germany’s share of exports of goods and services to GDP stands at 46%, as of 2016. That share is more than one and a half times the global average. Back in 1990, Germany’s share of exports to GDP was just 22.9%, about the same as that of China in 2002 or India in 2010.

The Netherlands’ share of exports to GDP, at 80.8%, is close to double that of Germany. The country has a relatively small national economy that has had a longstanding focus on exports. The share of Dutch GDP coming from exports, for comparison to developing economies, is between that of Malaysia (67.7%) and Vietnam (93.6%).

The export share is even higher in Ireland (119.9%). The world’s highest percentage in 2016 was 227.9%, which was recorded by Luxembourg.

Word count: 807