The numbers coming out of China continue to stagger. Despite a flurry of attempts by the government to slow down the economy, a government think tank is predicting that the growth rate for the first half of 2006 will be 10.4 percent, an increase over the first quarter figure of 10.3 percent. That is a phenomenal number and it is reflected in today's widely publicized trade surplus statistics. In June, China registered a trade surplus of $14.5 billion with the rest of the world, the largest monthly trade surplus one country has ever recorded.
Hard to see how that kind of growth can continue without eventually breaking the global economy. Economists and politicians are wringing their hands in dismay. As economist Brad Setser notes, China's first-half trade surplus in 2006 was 50 percent bigger than its first-half trade surplus in 2005, and back then, everybody thought that was an unsustainably huge number.
One of the extraordinary aspects of China's trade surplus figures is not just how fast exports are growing, but how imports are also surging. China's imports in June grew by 19 percent over a year earlier, to $66.8 billion. That's a lot of imports. And it got me wondering: Who does China have a trade deficit with?
The Web site of China's Ministry of Commerce offers a wealth of statistics, in English, including a list of the 10 countries with whom China has the largest trade deficits. For the months of January-May 2006, those countries are, in order, Taiwan, South Korea, Japan, Angola, Saudi Arabia, Philippines, Malaysia, Thailand, Oman and Iran.
Subtract Angola, Saudi Arabia, Oman and Iran -- they're on the list for one reason: oil. I had not realized that China's largest source of oil was Angola, but there you have it.
So what do you have left? A half-dozen close neighbors to China. Exports from Taiwan, South Korea and Japan likely skew to the high-tech side (Chinese imports of high-tech items for the first five months of 2006 grew at a rate of 30 percent over the previous year), and in many cases probably include components (such as semiconductors and liquid display screens) that are destined for goods that are exported from China. But Malaysia and Thailand also have booming electronics sectors -- they are far from being mere providers of raw materials to feed the Chinese maw.
But can we learn anything from this? It doesn't seem very helpful to note that if you want a trade surplus with China, find some oil or move your country next door to the Middle Kingdom. That would seem to be something of a dead end.
But there's another way to look at these numbers. Historically, Taiwan, South Korea, Japan and, to a lesser extent, Malaysia and Thailand are all nations that made a point of directing state resources and encouragement to industrial sectors that had high export potential. In other words, they engaged in explicit industrial policies to foster global economic competitiveness, and they have been reaping the benefits for decades.
And they look in good position to keep doing so, as long as China's growth continues.