Pace of growth fuels surge in China's trade with Japan

THE shifting balance of world economic power has resulted in China replacing Germany as Japan's second-largest trading partner in the first half of 1993. Last year China was fifth, behind the US, Germany, Taiwan and South Korea.

The semi-governmental Japan External Trade Organisation (Jetro) reported that trade between China and Japan jumped nearly 30 per cent to dollars 16.6bn in the first half, largely because of a surge in Chinese imports from Japan, which rose just over 50 per cent to dollars 7.8bn. A Jetro official said the volume for the whole of 1993 was expected to reach dollars 30bn.

More than half of China's imports from Japan consisted of machinery and equipment, reflecting the country's breakneck growth. Another 12 per cent was iron and steel products, which had to be bought abroad because the construction boom swallowed up more than could be produced at home.

China's exports to Japan rose 15 per cent to dollars 8.7bn, mainly in such high-volume, low-margin goods as textiles and footwear, which accounted for just over a third, followed by crude oil (10 per cent) and machinery (6.6 per cent). Japanese firms are shifting production to China from other Asian nations, however, and the added value of Chinese exports to Japan is expected to rise.

'China is tightening its financial grip on its overheating economy, and we should watch how that affects Sino-Japanese trade,' the Jetro official said. Shigeki Sakaki, an economist with Nomura Research in London, said China might slip down the trade league as a result, but would soon regain its position, while the effects of recession on Japan's trade with Germany could be deeper and longer-lasting. 'The longer-term trend will be for trade between Japan and China to increase much more,' he said.

The growth in bilateral trade was part of East Asia's wider economic expansion, Mr Sakaki said. Japan's neighbours now took a third of its total exports, a higher proportion than the US.