The ongoing modernization drive in China is one of the largest in human history. It will provide modern living conditions to an estimated 1.5 billion people - that is, one and half times the combined population of the developed world - by the middle of the 21st century.
To ensure the success of this modernization drive, China needs to import huge amounts of resources, fuels, devices and consumer goods, which will boost the growth of the global market. In this context, the past few years have revealed three major changes in Sino-US trade that best illustrate China's growth as the world's biggest market.
The most important change, of course, is that US exports to China have grown faster than imports from China. In 2000, the Chinese mainland was the 11th largest exporting market of the United States, but by 2007, it had overtaken Japan to become the third largest. Overall, US exports to the Chinese mainland, Hong Kong and Macao grew from $30.9 billion in 2000 to $164.8 billion in 2013, making them the fastest growing market for US exports.
US Secretary of State John Kerry has said that every $1 billion worth of exports creates more than 5,000 jobs for the US, so $164.8 billion means about 830,000 jobs - the best gift for a country whose politicians have been splitting hair over the high unemployment rate.
What's more, such growth will remain stable in the long run, because in their quest to raise their living standards Chinese people will continue to import more goods from the US. And even though the US is trying to push forward the Tran-Pacific Partnership Agreement as a club dominated by Western economies, it cannot afford to ignore China's huge market potential.
Besides, Chinese investment in the US is growing faster than US investment in China. According to New York-based advisory Rhodium Group, China's actual investment in the US from 2003 to 2013 was $25.5 billion and has continued to grow since the 2008 global financial crisis, and by 2020, China's total investment in the US is expected to exceed that of the US in China.
The reasons why Chinese investors find the US attractive are not only the rule of law, a well-trained workforce, advanced technologies and convenient energy supply, but also its huge consumption market. China's foreign exchange reserves have further boosted its overseas investment. As President Xi Jinping said at the Beijing APEC meeting last year, China's overseas investment will reach $1.25 trillion in 10 years, second only to the US'.
Moreover, the internationalization process of the yuan has been gaining pace. Since 2003, US politicians have been putting pressure on China for the yuan's appreciation to ease the trade imbalance. Yet the Chinese currency has appreciated at its own but steady pace. This shows China is confident of the yuan's internationalization process.
In fact, the yuan started becoming popular with neighboring countries and regions in the 1990s. Gradually, it started appealing to Western economies too. Today, offshore yuan reserves have reached 2 trillion yuan ($319.7 billion), while UnionPay cards of China's banks can be used in 142 countries and regions. Also, China has been making efforts to get the yuan into the Special Drawing Rights basket of the International Monetary Fund by 2020.
Nicknamed "paper gold", the currencies listed in the IMF basket are automatically included by the world's 220 economies in their foreign currency reserves. Up to now the basket has only four currencies - the US dollar, the euro, British pound and the Japanese yen. Every five years, the IMF deliberates which currencies to list in the basket and the yuan is the strongest candidate for the 2020 deliberation.
In its report, "Global Development Horizons 2011: Multipolarity - The New Global Economy", the World Bank has said the US dollar would lose dominance by 2025 and be replaced by a multinational currency system centered on the dollar, the euro and the yuan. China needs to take measures to ensure the World Bank's prediction comes true, so that Chinese nationals can travel anywhere in the world with a yuan account.
The author is a researcher at Center for US-China Relations, Tsinghua University.
