How China Will Benefit from a Trade War with America

    Huaiyin Li

    Economics, Asia

    A crane carries a container from a ship of Hanjin Shipping at Hanjin container terminal at the Busan New Port in Busan

    A trade war with China will generate immense pressure on Beijing and companies in the short run, but allow it to stop relying on the overseas market in the long run.

    The story of China’s rise is well known. Back in 1990, China’s gross domestic product ranked only the eleventh, lagging behind not only the United States, Japan, Germany, France, UK, Italy, Canada and Spain, but also two developing countries, Iran and Brazil. After a decade of two-digit growth, in 2000, China replaced Italy to be the sixth largest economy; in 2002, China ranked the fifth in place of France; in 2006 and 2007, it surpassed the UK and Germany, respectively, to be the fourth and then the third; finally, in 2010, China rose to number two, next only to the United States.

    It is even more astonishing when China’s fast-growing economy is compared to each of the major industrial nations. In 1990, China’s output, at $ 361 billion, was only 6 percent of the level of the United States, but it grew steadily afterwards, to 12 percent in 2000, 31 percent in 2008, and nearly 61 percent (or $ 1.12 trillion) in 2016. In fact, if measured by the PPP of the currencies of these two countries, China’s GDP surpassed that of the United States in 2013 and was 1.14 times the latter, or $ 2.14 trillion, in 2016. The contrast is even starker when compared to Japan. China’s GDP was 11 percent of Japan’s level in 1990 and 25 percent in 2000. In 2010, however, China surpassed Japan for the first time, and it took only four years for China to make its economy twice that of Japan in 2014. In 2016, China’s GDP is 2.4 times Japan’s (or four times Japan’s in terms of PPP-based GDP).

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