Monday, May 12, 2014

China and the Follies of "Megatrading"

Ulson Gunnar 
May 12, 2014

As if to stroke the egos of those ruling Beijing, the West's financial journals in chorus announced with enthusiasm that China has become the first 'megatrader' since the British Empire. The Wall Street Journal would report that Standard Chartered economists would even go as far as suggesting Beijing would shed the very economic policies that have led to its rise, and become a champion of 'free trade.'

The WSJ article titled, "Will ‘Mega-Trader’ China Turn Into a Free Trader?" claims, "once a country reaches such an exalted status, Standard Chartered reasons, it recognizes that its interest lies in opening markets overseas and at home."

The Standard Chartered report included a global map showing China's increase in global trade from the 1990's to 2012. It also reveals China's premier trading partner, the European Union, the Middle East and North Africa (MENA) from which it derives its oil, and Africa from which it seeks to procure mineral resources to fuel its expanding production-based economy, all lie along what is known as Chian's "String of Pearls." This global spanning logistical corridor represents perhaps China's largest vulnerability, a vulnerability it is fully aware of and has been engaged in for years attempting to defend.

Beijing realizes that global trade is both a threat and an opportunity. It has taken steps to maximize that opportunity in the short-term, and eliminate the threat in the long-term. This includes attempts to invest in science and technology to reduce its dependency on research and development from abroad, the expansion of its nuclear power network to reduce its reliance on hydrocarbons, and attempts to forge trading partnerships closer to and within its own boundaries. In other words, Beijing is attempting to become as self-sufficient as possible in the long term, while it takes advantage of its "megatrading" in the short term. The latter is providing the fuel for the former.

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