Opportunities still aplenty in China

But More needs to be done to improve foreign investment flows and boost the value of services trade

China became the world's biggest trader in goods for the first time last year, overtaking the US for all of 2013. While this is no doubt a creditable achievement, it also has far-reaching implications on other economies.

The steady expansion of China's trade, particularly after the global financial crisis of 2008, has been a major factor in shoring up global growth, especially after major economies such as the eurozone and Japan reported double and triple-dip recessions.

China's robust trade numbers also kept its economy on a strong footing and helped sustain full year economic growth at 7.7 percent. According to Customs data, for the full year, exports grew by 7.9 percent to $2.21 trillion, while imports rose 7.3 percent from a year earlier to $1.95 trillion.

By virtue of China being the biggest trading country, its economy is now more integrated than ever with the global economy. China's market-oriented reforms, especially those associated with opening-up, have created investment opportunities for foreign and domestic investors.

Multinational enterprises have been the biggest gainers from China's reforms push. Last year, foreign companies accounted for 46.1 percent of China's total trade in goods, while domestic private companies accounted for just 33.3 percent of the foreign trade.

Developed nations continued to be China's dominant trading partners, closely followed by the Association of Southeast Asian Nations and other emerging markets. The EU and the US were the two biggest trade partners last year, accounting for 13.4 percent and 12.5 percent of China's foreign trade. ASEAN was the third-biggest trade partner with a 10.7 percent share, while Japan and South Korea accounted for 7.5 percent and 6.6 percent respectively. The BRICS economies including Brazil, India, Russia, and South Africa collectively accounted for 7.5 percent of China's foreign trade.

China's trade prospects in the long term look bright due to the potential for sustained, steady economic growth. Although its annual growth rate may slow to about 7.5 percent this year, it would pave the way for further reforms.

There are already ample indications that China's next round of reforms will provide more consistent growth drivers, ones that can ensure economic growth of more than 7 percent over the next 10 or 20 years.

While the growth may be lower than earlier, it would still be higher than the rest of the world. China's economy and its per capita income are forecast to double by 2020, and consequently lead to a doubling of foreign trade.

It is also important to realize that the continuous expansion of China's foreign trade comes with more opportunities, than threats, to the rest of the world. China's three decades of globalization and reforms have allowed multinational firms, mostly from advanced economies, to explore various investment opportunities and generate profits. That trend is expected to continue over time.

Emerging and developing economies have benefited from market access and also from various spillover effects associated with cross-border trade, investment, and financial cooperation.

China's domestic markets and its sizable middle-class population are expected to create new market opportunities for global companies, while the outbound moves by Chinese companies in overseas markets are expected to prop up several foreign economies.

Responsibility has been a major tenet of globalization, and China has more than fulfilled its commitments. It has demonstrated that it has been a responsible global shareholder by joining the World Trade Organization, and adhering to the various international laws and regulations. Other examples include its participation in global governance, monetary reforms and signing several trade, investment and financial agreements with other economies.

Although China has faced a barrage of trade and economic disputes with developed nations in recent years, it has striven to solve these differences through constructive dialogue, communication and negotiations.

Even though it is a large trading nation, China's trade structure is still far from competitive. Though a majority of China's exports are manufactured goods, their added value is significantly lower than that of advanced economies. In fact, a large proportion of China's exports are in the processing trade with an added value lower than normal exports.

It is common to see many final, sophisticated products from foreign brands being assembled in China. Leading US brands such as Apple, Hewlett-Packard and Dell, European brands such as Siemens, Philips and Electrolux, and Japanese brands such as Sony, Toshiba and Fujitsu all assemble their products in China. None of the technically sophisticated parts are, however, manufactured in China.

The huge value of China's foreign trade pales into insignificance when one extrapolates it with its big population. For most Chinese consumers, imported goods are more expensive and still a luxury. They are also seen as having little relevance in their daily lives.

In contrast, most of the imported goods for consumers in advanced economies are much cheaper, and so satisfy individuals' tastes and welfare. What this also means is that though China's trade in goods has surpassed that of the US, the actual value of China's services trade is still less than the half of the US.

The author is director of the Institute for International Economic Research under the National Development and Reform Comission.