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China surpasses US as world's largest trading nation (theguardian.com)
61 points by yapcguy 1375 days ago | hide | past | web | 62 comments | favorite

I'm of an European descent and I'm not talking on behalf of Japanese nation. Just my personal thoughts.

Japan (Tokyo) is my permanent home and I feel unease with all the economic developments of our immediate neighbor.

I'm more than happy that they could lift themselves up from poverty and I'll be happy if we could be good mutually respecting partners.

But I'm also quite concerned about my future in the next 10-15 years. Quick economic success can lead a nation to feel they are better than others. History tend to repeat itself.

Here is an outlook for the coming Great Siberian War: http://www.dod.gov/pubs/foi/International_security_affairs/c...

Chinese don't have to start wars, they just need to keep (em)migrating. A peaceful conquest. Also by 2030 Tokyo/Japan will be a one big retirement centre, so you will have to enable more immigration (or finally come up with really good robots/rejuvenation pills).

And to make things worse, lets say Japan has a "collective karma" against China.. I dont know how this generation(post-war) handle this... and if its just buried in the past..

Also we got one more powerful actor into the club of bullies (together with US and Russia)...

If one of those 3 bullies clash with each other (and boy, they like a fight).. say farewell to our beloved peace..

And how did Japan get to where it is today, without fast economic success?

I think you have nothing to worry about. Big powerful countries rarely fight each other because they both lose. China would always back down from a war because they have most to lose, unless they were facing direct invasion by outside forces.

Also nobody wants Siberia and I'm willing to bet the cost of annexing it and trying to revitalize it as some new economic zone would be a fruitless effort. I mean if Mongols didn't want it back then I'm sure nobody else wants it now

NPR's Marketplace did a story on this recently and it turns out that there are some tricks they play that, if properly accounted for, indicate that China is not the world's largest trading nation.


The interesting thing about world trade though is that even if China mis-reports other countries do not. You can sum the Chinese imports reported by countries you trust and get some guesses around how much distortion is in the Chinese "official" numbers.

But doing so misses the point. Unlike internal metrics, which have been abused for centuries to give outsiders an impression of greater strength, trade metrics are much harder to "fake." You can, if you choose to, create fake businesses in countries around the world and have them report importing non-existent goods (and pay taxes and duties on those goods!) to give the appearance of a larger trade than you have, but at these magnitudes 3 - 4 trillion it just isn't feasible to fake any more.

So the real story isn't whether or not China is the worlds "largest" trader of goods, but that it is even arguable compared to the US economy is something of an "oh crap" moment in terms of global geo-politics.

Economies are power. If you have the largest economy you are the most powerful nation because if push came to shove, you can out produce a lesser economic power and win a war of attrition.

Going to be a very interesting century.

>Economies are power. If you have the largest economy you are the most powerful nation because if push came to shove, you can out produce a lesser economic power and win a war of attrition.

If that were true, China would be on similar footing to the US, militarily. But it's not. Not even close.

I'll grant that given equal military spending, China would catch up to the US eventually, but it would probably take a decade or three. That's a decade or three of equivalent military spending. And right now China isn't spending anywhere near the US rate.

>but it would probably take a decade or three.

That is seems like very long. Why would it take three decades?

It takes a long time to design and build modern aircraft carriers, then you've got to develop the doctrine and good habits to put all of it to use.

The modern world isn't WWII, when you could just throw some aircraft up there and let them shoot it out. Modern aircraft combat amplifies even small differences in ability; a squadron of F-22's might shoot down a squadron of F-15's before the F-15's diagnostics and support could even spot them. I've read anonymous anecdotes of US vs UK wargames in which the last gen US fighters (pre-F22) would wipe out all of the UK aircraft before being detected. Anonymous anecdote, but still.

The US also has decades of anti-guided and anti-ballistic missile research and experience. Sure the pure technology can be copied quick, but deploying it to your sea fleet and again developing the proper doctrine and support systems for actually using the stuff takes time.

I'm not familiar with the Chinese submarine situation, but the US takes that area very seriously as well.

And the problem is that you've got to be strong on all three fronts. Losing largely on any one - surface ship, air combat, submarine - means that your entire fleet may be sent to the bottom of the sea in mere hours... or minutes.

Note that the Chinese military leaders understand this, and are focusing their efforts on asymmetric defensive warfare - at least as pertains the US. 'Carrier killer' missiles, sufficient numbers of cruise missiles to overwhelm US naval defenses, submarines. These are relatively cheap and enough to keep the US off China's back (indeed the US is rumored to be keeping all carriers far far away from Chinese coastlines due to the carrier killer) - but it's not enough to achieve anything like parity.

Of course I'm just an armchair guy on the internet. I don't have any inside knowledge, just what I've gathered in my reading.

I'd be interested in reading those anecdotal stories as I find it pretty implausible.

They were spoken to me, by Brits.

Some out of context data pulled from Wikis etc:

"In January 2007, it was reported that the F-22... [amassed] a 144-to-zero kill ratio during "Northern Edge" air-to-air exercises held in Alaska, the first large-scale exercise in which the Raptor participated."


"I can't see the [expletive deleted] thing," said RAAF Squadron Leader Stephen Chappell, exchange F-15 pilot in the 65th Aggressor Squadron. "It won't let me put a weapons system on it, even when I can see it visually through the canopy. [Flying against the F-22] annoys the hell out of me."

Lt. Col. Larry Bruce, 65th AS commander, admits flying against the Raptor is a very frustrating experience. Reluctantly, he admitted "it's humbling to fly against the F-22," - humbling, not only because of its stealth, but also its unmatched maneuverability and power.



Edit: And found one of F22 v Eurofighters; both are GenV fighters:

Two other German officers, Col. Andreas Pfeiffer and Maj. Marco Gumbrecht, noted in the same report that the F-22′s capabilities are “overwhelming” when it comes to modern, long-range combat as the stealth fighter is designed to engage multiple enemies well-beyond the pilot’s natural field of vision – mostly while the F-22 is still out of the other plane’s range. Grumbrecht said that even if his planes did everything right, they weren’t able to get within 20 miles of the next-generation jets before being targeted.

“But as soon as you get to the merge…” Pfeiffer said, referring to the point at which fighters engage in close-up dog fighting, “in that area, at least, the Typhoon doesn’t necessarily have to fear the F-22 in all aspects… In the dogfight the Eurofighter is at least as capable as the F-22, with advantages in some aspects.”


I really wouldn't call your first example:

>I've read anonymous anecdotes of US vs UK wargames in which the last gen US fighters (pre-F22) would wipe out all of the UK aircraft before being detected.

Now the UK's bought into the F-35 and what a mess that's turning into.


The above argument and the fact that there's something in military experience that newly wealthy countries don't have. There's a lot of cultural knowledge about how to win a war that doesn't exist in countries that haven't really warred in the last century.

According to this article[0], most of their economic numbers are severely distorted by manipulation.

0: http://www.theage.com.au/business/china/is-george-soros-bett...

If you believe that China, or Chinese corporations, play accounting tricks, would you accept that all countries and all corporations play tricks to boost their figures too?

We know for a fact that Starbucks, Google, etc perform accounting tricks to shift sales from the UK to Ireland.

In the end, doesn't this all trickery cancel each other out, meaning that the rankings are a fair reflection?

It's possible, but the argument that Starbucks/Google shifting sales from the UK to Ireland implies that the United States is playing accounting tricks with imports and exports is non sequitur. And the implicit assertion that if all countries were playing tricks, they must be playing it equally enough to cancel each other out is also not valid without providing additional supporting evidence.

The article provides an estimate that 1/3rd of Chinese imports were from China itself. I have never heard any kind of claim of that magnitude leveled against the present United States.

This is a more articulate and well-thought out than I could have crafted, but it expresses my sentiment perfectly.

The one point I'd like to add is that China incentivizes their companies to export through tax rebates and then incentivizes imports from HK through the absence of tariffs. The makes it profitable for companies to artificially boost exports. I have not seen similar mechanisms available in the US.

That's a very interesting observation.

It's important to note that China does have a dual system of Governance within itself: Democracy (Hong Kong) + Communist control (Mainland). Thus it can, and does, leverage best of both worlds to doing business efficiently.

This also means that Hong Kong, for a city, is in a very strong position to grow up into a cutting edge city of future given the volumes it has to handle for mainland China.

No, it doesn't all cancel out.

China today is basically China, Inc. The people in charge of every aspect of the government are heavily motivated to manipulate this sort of data, just the same way as they try to cover up the pollution in their major cities. In contrast the economies and political systems in the US, Europe, etc. are far more open and not as easily vulnerable to this type of manipulation.

Why do (some) people still assume that anything coming out of China and Russia must be bad and viewed with suspicion?

How about LIBOR rigging? Or traffic lane closures to spite political opponents? If anything you could argue manipulation in the US and Europe is far more sophisticated than China. For example, there's manipulation in plain sight: focus on the U-3 unemployment number rather than the U-6, never mention the labor participation rate where 92 million people in the US have given up looking for work.

And look at the news in the UK newspapers today:

The corruption of Britain: UK’s key institutions infiltrated by criminals

Secret report shows how organised crime infiltrated judicial system as well as police with prison service and HM Revenue & Customs also compromised.


Tu quoque?

Yeah, there's corruption in the US/Europe/Japan et al, but that level of corruption is dwarfed by the deeply systemic corruption up to the highest levels in China and Russia, among other places. The fact is you can't even tell what China's GDP is within a factor of maybe +/- 50% due to that corruption.

I'll let the accountants and economists weigh in on that. But I'd rather rely on data than the argument "they all play accounting tricks therefore it must all cancel out". In other words, I'd like to see a similar analysis of the US's trade numbers and see if the resultant 'trickery' adjustment results in a significant shift in the trade numbers.

Do I have to accept that China and all other governments are exactly the same in order to accept this?

is this like saying China is being unfair by hacking into our stuff?

With four times as many people as the US, isn't passing the trade per person a more notable milestone? (If you have to define one).

I'm a bit leery of announcements like this since it's really hard to compare economies to each other (like comparing apples to oranges), but as a US citizen, I can tell you that I'm much more concerned about the state of our political system than our economy.

With three times as many people as the US, isn't passing the trade per person a more notable milestone?

That's certainly notable, but not interchangeable with this one. The total size of your economy reflects certain opportunities for scale, regardless of your population and/or productivity.

If we think about corporations, when you have certain purchasing power, you can extract certain concessions from your vendors regardless of how many employees you have. When you manufacture and ship a certain number of products, you can profitably invest in infrastructure, again regardless of the number of employees you have.

I feel that the same argument extends to trade on the scale of countries. Which does not devalue the milestone you describe, just that they have different consequences.

But when I think of governments, the largest ones are almost always the most corrupt and inefficient.

Compare US to UK. California to Washington (state). EU to formerly more independent nations.

In each case the larger state delivers services less effectively, with more waste, arguably more corruption, and more useless nanny state rules.

I won't take that bait, but I will say that wasteful or not, the US can lean more heavily on its trading partners for concessions, just as whether wasteful or not, giants like WalMart can lean on their trading partners.

Size is might, even if it's blundering, wasteful, and inefficient. (Although I am not saying the US is any of those things).

Totally agree that size is might.

The question is whether or not might is good! (As in, is it better for your own government to be mighty or puny)

Many folks would rather live in puny Switzerland or Sweden than mighty Russia and China.

On the other end of the spectrum Iceland is fascinating, because by their independence a relatively small group of people has much power. (Iceland is also an example of corruption in a small nation)

I didn't know that Iceland was considered to have corruption in any meaningful quantity!

I faintly recall a study (by an Icelandic economist, if memory serves) which showed that Iceland had one of the lowest "corruption ratings" in the entire world! Perhaps I or the study are mistaken. Wouldn't be the first time.

It's a so small country that family and friend ties in government and administration are hard to avoid, for one thing.

The examples of corruption I'm thinking of are all related to the financial crash and Icesave scandal in Iceland.

Hmmm. Just read over the Icesave Scandal wiki. Doesn't looks os much like corruption as it does the Icelandic government trying to mitigate/avoid the large deposit insurance payments they'd otherwise be required to pay.

Normally most people consider corruption to be some kind of private-public intermingling. But this was all about the public side trying to protect itself (I think?).

Former PM Geir Haarde was on trial for his involvement. The powerful pretty much went in lockstep, with the smoking hot icelandic economy after a growing banking sector, it looked like every icelander benefitted, being able to take loans and buying multiple cars. With the "success", the people in charge let themselves be instruments of a run away modern high-risk banking sector, not their doing their job as regulators.


I agree with your overall point but I think your corporation analogy is slightly flawed. To my mind, the appropriate analogy with a corporation is a comparison of citizens to customers rather than employees. That is, the original commenter would like to see a number more like ARPU. Something like Average Trade Per Capita (ATPC)?

"With three times as many people as the US, isn't passing the trade per person a more notable milestone?"

Not necessarily -- they are both important.

Consider how much impact the decisions of one central government in China have, now that they are the largest trading nation. You couldn't say the same thing about a small nation with high per-capita trade.

Not to nitpick, but China is 4.29 times the U.S. population.

That IS nitpicking ... and yet I was so far off. I seem to have turned off my math-brain for Saturday (I should go for a bike ride).

No, that's what people tell themselves so they feel better about second place. In fact, it's both a little infuriating and embarrassing.

America didn't/doesn't have to fall to second place but we kind of did it to ourselves. We're going to be #2 in a lot of things, so let's get over it now.

who ISN'T leery? do you think a single person reading that is thinking some objective ranking has been established?

Even if we discount the accuracy of the published numbers, are the trends correct? What I'd want to understand is: Is China's economic activity growing faster than their population?

Wouldn't that indicate rising wages and improving standard of living? Perhaps we'd need to adjust for inflation, but the trade they report is largely with countries where the published inflation rates are more trusted. And I think the experience of US manufacturers, who report rising costs in Chinese manufacturing,

http://online.wsj.com/news/articles/SB1000142412788732476700... ,

bears that out.

Another consideration, and different topic entirely that I think will play into the trends over the next decade, is what is the ecological cost of this growth, regardless of whether it is 5, 10 or 15%.

What I expect over the next 10 years, is a slowing and reversal of 'going to China' for contract manufacturing. That reversal will be accelerated by increasing reports of this same manufacturing decimating China's ecology, and the pollutants seeping across international borders.

Indeed a major milestone, though more interesting will be when they surpass the EU and US in imports.

To some extent being the world's chief importer proffers the most power: because suddenly everyone is dependent on you for what they sell. You become the customer.

Once China becomes the "world's customer" the US's power will be severely eroded.

Rumor is that if you include the grey markets in China, their GDP already surpasses that of the US as well.

This is incorrect (not the first time Guardian has published misleading articles )

The headline says "world's largest trading nation" Total trade is the sum of trade in goods and services. China may have become the largest trader in goods but it is sixth largest in services. US is still the largest in trade in services by far and if the sum of trade in goods and services is counted, looks like China will still take few years to pass America.

Year 2012: US total trade in services = $1.02T China total trade in services = $0.471T

Source: WTO http://www.wto.org/english/news_e/pres13_e/pr688_e.htm (look at Appendix 2 at the end of the article )

the same quote and facts are repeated no less than 3 times in the first few paragraphs of the article.

why do journalists do this? it's incredibly annoying to read because i'm just reading the same thing over and over, restated. it makes me feel like i'm a 6 year old with a big-print book.

do certain paragraphs get chopped off in syndication? are they going for a threshold word count by repeating things? i can think of no other reasons why this style of writing would be popular.

Interesting, quite a few no.1 positions being taken over by China recently! Looking stronger than ever, in-spite of the various territorial issues.

Well it is the most populous country in the world and all.

Good point.

The most impressive point won't be when Chinese GDP surpasses the US, but when Chinese GDP surpasses 4.2*US GDP.

Or just: when China's per capita GDP surpasses that of the US (since the 4.2 probably won't remain constant).

From what I've read, with current Chinese growth trends, that won't happen for another 100 years. Unlike other, smaller East Asian countries (Japan, Taiwan, South Korea) that have grown on the back of export-based manufacturing, China is far too large to base its growth on exports alone.

It may take much longer than that. China's birthrate is low, so the nation may experience severe greying related problems.

India, however...

6 or 7 countries already surpasse the GDP per capita of the US [1], so that's not really a a landmark milestone.

[1] http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP...

Five or six postage stamp countries plus Norway, an extremely oil rich nation (in oil per capita terms).

The US remains the landmark.

If you're suggesting that we take into account how well the wealth is distributed, then again, the US isn't a landmark. However it's hard to evaluate, maybe [1]

[1] http://en.wikipedia.org/wiki/List_of_countries_by_income_equ...

>If you're suggesting that we take into account how well the wealth is distributed

I'm not. Why on earth would you think I meant that?

Empires rise and fall at ever-faster rate.

China doesn't exactly have a good track record of integrity and transparency so this article really does not portray the intended shock. People still remember the Air Defense Zone China expanded but how nobody really gave a crap, because as the old Chinese proverb goes, "Empty Wheelbarrow Is Always Loudest"

I agree with your sentiment, but Obama flying a couple B-2's through that zone is the opposite of not giving a crap. There's a lot of concern about their efforts to expand territory and naval dominance in that region.

> Obama flying a couple B-2's through that zone is the opposite of not giving a crap.

It wasn't just America, it was South Korea, Japan which largely ignored it and South Korea ended up expanding their own territory.

I would have to agree with the rising naval tension in the region, but the new lines drawn by China is not at all being respected nor will they be expected to unless China is willing to challenge the United States in a direct confrontation.

Agreed. Ultimately it's all bluster unless someone is willing to pose a direct military challenge.

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