Introduction
Exports can be seen as a mechanism for economic growth of a country. Increased exportation of products can provide output growth directly as part of aggregate output. An increase of foreign demand of products can result in a country’s growth through employment and additional income for exporters. Another significant contribution of exports is that it can impact economic growth by way of “efficient resource allocation,” including more economies of scale and technological change as a result of “foreign market competition” (Helpman & Krugman, 198; Ben-David & Loewy, 1998 as cited in Awokuse, 2008, p. 593).
One of the drivers for economic changes in Japan and China is exports. This characterizes the economies of China and Japan, although there are other factors that contribute to their economic growths. The United States has exchanged exports to these two economies, which has resulted into trade agreements.
The purpose of this essay is to describe the economies of Japan and China, and how they are compared to the United States. The U.S., on the other hand, has continuously grown economically, with the help of export/import trade with other countries.
China exports
First, we describe China, whose top export includes mechanical and electrical products, technology products, and other labor-intensive products like textiles, footwear, furniture, plastics and ceramics, and much more (Trading Economics, 2016). Since its access to the world market, China has expanded its export activities globally, but most especially to the United States and the European Union.
A significant percentage of China’s import trade is in medium- and high-technology intermediate, or processed, goods (Thorbecke & Yoshitomi, 2006 as cited in Smith, 2008). These goods, which are primarily electronics and machine-related parts and components, come from developed East Asia and the NIEs in the region (Athukorala & Yamashita, 2005 as cited in Smith, 2008). The imports are used as subsequent inputs into final goods (also designated as processed goods for export purposes) which are then exported out of China to the rest of the world (Smith, 2008). This transformation process represents the second part of the triangular trading pattern.
Once received into China, foreign-funded enterprises take a lead role in converting processed goods into exportable finished products. Foreign-funded enterprises are overwhelmingly invested into manufacturing operations. They are mostly located in the largest growth provinces and major export centers in China, including Guangdong (Pearl River Delta) and Jiangsu, Shanghai, and Zhejiang (Yangtze River Delta) (Smith, 2008).
Chinese exports are divided into two types, ordinary and processed. Ordinary exports are goods which are assembled in China, primarily from domestic inputs, and then exported as final goods to the rest of the world. Processed exports, on the other hand, are goods that are assembled primarily from imports for processing and then exported as final goods.
The main destinations for Chinese exports in 2006 were the United States and Europe. The U.S. and EU accounted for 40 percent of China’s total outbound traffic. This was followed closely behind by Hong Kong, with over 15 percent of export trade. However, a significant percentage of the export trade headed to Hong Kong is subsequently rerouted to other destinations throughout the world (Smith, 2008).
China’s economy used to grow at 9-10% annually over the last decade (Wu, 2011), but this has been reduced to 6% these past few years. China has a unique role within the global trading network. With the help of government incentives, a stable exchange rate, and a relatively inexpensive labor force, China has attracted a significant amount of foreign direct investment (FDI). This investment has been used by foreign-based companies to establish manufacturing operations within China for the purpose of final product assembly. These products are then exported to the rest of the world, primarily to the United States and Europe (Smith, 2008).
China’s rise within the global economy began in the late 1970s during the reign of Deng Xiaoping who introduced economic reforms aiming for free market flexibility for firms willing to invest in China. Special Economic Zones (SEZs) were established in which foreigners could make direct investments into the ownership and operation of manufacturing facilities for the purpose of export. It also carried with it a number of tax and operational incentives that gave significant cost advantages to these newly created foreign-funded enterprises (Smith, 2008).
The first SEZ was established in 1980 in Shenzhen, Guangdong province along the Pearl River Delta, which then became a model for success of foreign-funded private enterprise in China. With its proximity to Hong Kong and Taiwan, Shenzhen and the entire Pearl River Delta benefited from large inflows of foreign direct investment into the region. Taking advantage of a number of factors including a relatively inexpensive labor market, easy access to raw materials, and a highly evolved transportation and distribution network, manufacturers were able to produce goods at lower costs than most other locations in East Asia. This was combined with a favorable and very stable exchange rate and allowed the Pearl River Delta to become one of the largest manufacturing centers in China. In the process, Guangdong emerged as China’s largest province in terms of export share, GDP share, and industrial output (National Bureau of Statistics of China and the Ministry of Commerce of the People’s Republic of China as cited in Smith, 2008).
Renewable energy
China has ventured in renewable energy (RE) as a primary export product. In 2012, its total RE exports reached $74.4 billion. Solar products have reached unprecedented growth, accompanied by wind energy products (Zhao, Wang, & Yu, 2016). Other RE products which have had unprecedented growth include biomass, geothermal, and ocean energy products. China’s accession to the WTO was attributed to the growth of these RE products. Solar energy exports reached 72% of all RE exports in 2012, whereas wind energy products had 23% share, and ocean energy products reached 8% (Zhao et al., 2016). Exports of RE products to the U.S. and Netherlands registered US$8 billion and US$4 billion, respectively, in 2012.
Furniture
In 2000, China surpassed Canada as the number one furniture exporter in the world (Cao et al., 2004 as cited in Hongqiang, Chunyi, Ying, & Yinxing, 2012). The furniture industry is comprised of “metal furniture, wood furniture, upholstered furniture, plastic furniture, glass furniture” (National Bureau of Statistics of China, 2011 as cited in Hongkiang et al., 2012). Based on China’s national statistics, the provinces of Guangdong, Shandong, Zhejiang, Liaoning, and Fujian have the largest wood furniture output, accounting to about 76 percent of the country’s output.
China was the world’s top furniture exporter from 2006 to 2010, with revenue reaching US$18.0 billion, equivalent to 27.3 percent of global furniture exports (Hongkiang et al., 2012). China’s furniture products are less costly than the world price; its average unit price for office furniture is US40, compared to Canada or Indonesia which is US$50. The furniture exports were sent to about 200 countries. The United States was the largest importer of China’s furniture products in 2010, accounting to about 60% of China’s kitchen furniture exports; the next were Japan and the United Kingdom. Japan imported large volumes, increasing at an annual rate of 11% (Hongkiang et al., 2012).
Japan exports
Before the 1960s, the Japanese market was isolated from international competition. This closed-market feature contributed to the slow growth of the Japanese economy. Foreign direct investments (FDI) were constrained. However, when Japan started exporting, its economy grew speedily at an average growth rate of 9%.
Japanese exports to world market reached US$625.1 billion in 2015. This includes vehicles, auto parts, electronic equipment, medical equipment, iron and steel, oil, and much more. Vehicles account to US$134 billion, equivalent to 21.4 percent of total exports (Workman, 2016). This is followed by machines, engines and parts. Electronics is another major Japanese export to the United States, Europe and some countries in Asia (Workman, 2016). The IT sector is different from electronics, which is a primary source of export. IT products are a part of the Information and Communication Technology (ICT) sector, and software largely contributes to this segment (Cole & Nakata, 2014).
Japan’s export companies are mostly vehicle and technology companies. This includes Toyota Motor, the number one exporter, having revenue of US$406.7 billion, or 5.5% of total exports. Toyota has many subsidiaries throughout the world, including the United States, Europe, and many parts of Asia. Next is Honda Motor, with annual revenue of US$154.5 billion, or 4.5% of total exports. Nissan Motor is third, followed by Sony (for consumer electronic products), and the rest are still vehicle companies (Workman, 2016).
Japanese exporters have grown their asset values since 2015, and this was led by Mitsubishi Heavy Industries, whose exports have been transported to the United States, Europe and other countries.
The United States Export Industry
The United States is the number one economy in the world; this is followed by China and Japan. It can be said that these countries control the world economy, but they do not compete with each other; in fact, they reciprocate because they are trading partners (Smith, 2008). Politically, China is different from the United States’ and the Japanese political systems.
Compared to China and Japan, the United States export industry is the biggest, reaching US1.51 trillion in 2015; its top ten exports totaled 68.4% of its entire exports. The top ten include machines, engines, and pumps, which had a total revenue of US$205.8 billion, or 13.7% of total exports. Electronic equipment was second, amounting to $169.8 billion, or 11.3% of total exports. Aircraft sales occupy the third spot, accounting to $131.1 billion, or 8.7% of total exports. The United States is also an oil-exporting country, and its export amounted to $106.1 billion in 2015, or 7.1% of total exports (Workman, 2016). According to Workman (2016), aircraft and spacecraft are the fastest growing export industries in 2015, and is believe to grow further this 2016. The U.S. major export partners are the European Union, China, Japan, and many countries of the world.
China has increasingly grown into a world economic power, and this is due primarily to its openness to the world market. Along with this economic growth is its increasing export of ordinary and processed products to many countries of the world. Japanese exports are also in demand in the United States and Europe because of quality. The United States has remained the leader economically and militarily. U.S. exports can also boast of quality and originality.
References
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Cole, R., & Nakata, Y. (2014). The Japanese software industry: What went wrong and what we can we learn from it? California Management Review, 57(1), 16-43. 10.1525/cmr.2014.57.1.16
Hongqiang, Y., Chunyi, J., Ying, N., & Yinxing, H. (2012). China’s wood furniture manufacturing industry: Industrial cluster and export competitiveness. Forestry Products Journal, 63(3), 214-221. Retrieved from http://web.b.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=6a668011-e153-4611-a71d-e4ac14669084%40sessionmgr103&vid=0&hid=102
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Zhao, Y., Wang, L., & Yu, Y. (2016). Trade liberalization and China’s export of renewable energy products: Evidence from product level data. Emerging Markets Finance & Trade, 52(6), 1281-1297. doi: 10.1080/1540496X.2016.1152788
