The China Factor

China is becoming increasingly important to forex traders in evaluating trading opportunities.
This chapter provides a review of key China developments that every
trader should know about.
Watching Chinese economic developments is likely to become a daily pastime for
many traders all over the world. Since the 1970s, China’s growth rate has been approaching
over 10 percent per year. In 2006, the Chinese reported that China’s gross domestic
product (GDP) reached 20.94 trillion yuan, up 10.7 percent from the year before (Financial
Times Information). Almost every day there is news on China’s economic performance.
China is impacting every region of the world and every industry. For example,
the Chinese Ministry of Information Industry reported that China has the world’s second
largest population of Internet users after the United States, with 137 million people
online.
In March 2007, China replaced the United States as Europe’s second biggest source
of imports after Britain. This occurred after a 21 percent increase in imports from China
to the 25 countries forming the European Union (Financial Times, March 23, 2007,
p. 2). China’s trade with Russia is another example. The trade between China and Russia
is reported to exceed the 30 percent per year growth from 1999 to 2005 and is now over $7
billion per year (China economic net). Over half of China’s trade is within Asia, between
Japan and South Korea. Regarding China and the United States, it has been reported that
“from 2000 to 2005, U.S. exports to China grew almost 160 percent, while U.S. exports
to the rest of the world rose by only 16 percent. During that period, China accounted for
roughly 25 percent of total U.S. export growth” (C. Fred Bergsten, Bates Gill, Nicholas
R. Lardy, and Derek Mitchell, China: The Balance Sheet: What the World Needs to Know
Now about the Emerging Superpower. New York: PublicAffairs, 2006).

It will certainly benefit all to become familiar with China’s economic events and how
they may impact currency moves. Let’s explore some key factors.




By ABE COFNAS