Finally Chinese goods are replaced from the shelves of US primarily followed with other economies. Chinese Exports fell 20.5% to US$957.36 billion. One of the prime reasons for such a decline is the falling dollar. More the dollar will fall the more costly the export will become. Trade value between China and the country’s three major trade partners, the EU, the U.S. and Japan, was US$292.42 billion, US$239.36 billion, and US$182.34 billion in the first ten months, down 18.7%, 14.9% and 19.3%, respectively.
In one way US have gained a lot due to this prime factor.
So in the coming days as more dollar will remain under the deep bottom levels the more one will see decline in export of China and other Asian economies. At the same time we will find US GDP growth is pegging up as more domestic products will be consumed and less exported. Now a question might come in the minds of my readers that is the dollar fall is being created deliberately. It’s hard to answere but as more US fiscal deficit will increase the more downside u will get in dollar. The below chart shows the GDP of China from 2006 to 2009 till date..The China GDP had an average growth rate of 10.5%.The economy is also getting back on the feets of maintaining the average rate.
In the comings days china will face one of the hard times to push its products in other economies.
China has increased its industrial investments to record levels.
China’s urban fixed-asset investment rose 33.1% in the first 10 months to 15.07 trillion yuan (US$2.21 trillion), compared with the same period a year earlier. The growth rate was 5.9% points higher than that in the same period of last year.
But the bitter fact remains that all these growth needs to be converted into revenue which depends primarily on other economies. The Chinese government is also cautious on this danger point of line. In few of the sectors the Chinese government is planning some radically changes. Like wise the government is increasing mergers and restructuring in the country’s steel sector to help create three to five globally competitive steel-making giants. This consolidation is required since the government plans to :
The government have also planned to go for M&A in automobile space of China.
Till now the value of quarterly M&A deals of China grew from US$1.3 billion in the first quarter of this year to US$8.9 billion in the third quarter. This is also giving the Chinese industry expand and grow their business size. This will give the companies the power to go for overseas expansion.
So China is well planning ahead of US and following well the mistakes made by US auto majors. It going for consolidation to increase the quality and reducing the number of scattered operations and coming to some finest quality products in the coming days. US might find some hard times in many industries among which auto and steel remains a threat to US.
Written By: Indranil Sen Gupta , Research Analyst