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China economy
OpinionWorld Opinion
Lawrence J. Lau
Opinion
Lawrence J. Lau

Why the impact of US tariff war on China won’t be all that great

China’s shrinking dependence on exports and the US, coupled with its economic resilience, means it can still grow by 4.5 per cent this year

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Illustration: Craig Stephens
Lawrence J. Lau
Lawrence J. Lau is the Ralph and Claire Landau Professor of Economics at the Chinese University of Hong Kong, and the Kwoh-Ting Li Professor in Economic Development, emeritus, at Stanford University.
The hail of US tariffs has shone a spotlight on export dependence. For China, dependence on exports, in particular to the United States, has fallen significantly over the last two decades, as has its reliance on foreign direct investment, including from the US.

Last year, exports – of both goods and services – were 21.2 per cent of China’s gross domestic product, falling to 19.2 per cent in the first quarter of this year, down from a peak of 35.5 per cent in 2006. Its trade surplus has also shrunk, with net exports at 4.37 per cent of GDP last year, down from a peak of 8.55 per cent in 2007.

As the US market became less important, China’s exports to the United States fell to just 2.9 per cent of GDP last year, from a peak of 7.5 per cent in 2006. Exports to the US made up about 14 per cent of China’s total last year. The trade surplus has also dropped dramatically, with net exports to the US worth just 1.74 per cent of GDP last year, from a peak of 5 per cent in 2006.

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