China makes the most of recession in global trade

China’s exports this year have already vaulted it past Germany to become the world’s biggest exporter. Now, those market share gains are threatening to increase trade frictions with the United States and Europe. The European Commission proposed on Tuesday to extend antidumping duties on Chinese, as well as Vietnamese, shoe imports.

China is winning a larger piece of a shrinking pie. Although world trade declined this year because of the recession, consumers are demanding lower-priced goods and Beijing, determined to keep its export machine humming, is finding a way to deliver.  The country’s factories are aggressively reducing prices — allowing China to gain ground in old markets and make inroads in new ones.

The most striking gains have come in the United States, where China has displaced Canada this year as the largest supplier of imports. In the first seven months of 2008, just under 15 per cent of American imports came from China. Over the same period this year, 19 per cent did. Meanwhile, Canada’s share of American imports fell to 14.5 per cent, from nearly 17 per cent. Besides increasing its share of many American markets, China is increasing the value of exports in absolute terms in some categories. In knit apparel, for instance, American imports from China jumped 10 per cent through July of this year — while America’s imports from Mexico, Honduras, Guatemala and El Salvador plunged 19 to 24 per cent in each country, according to Global Trade Information Services.

One reason is the ability of Chinese manufacturers to quickly slash prices by reducing wages and other costs in production zones that often rely on migrant workers. Factory managers here say American buyers are demanding they do just that.

Because China produces a diversified portfolio of low-priced and essential items, analysts say the country’s exports can hold up relatively well in a recession. Few other countries can match what has come to be called the “China Price.”