Amid recession, China expands lead in global trade

SHANGHAI -- With the global recession making consumers and businesses more price-conscious, China is grabbing market share from its export competitors, solidifying a dominance in world trade that many economists say could last long after any economic recovery.

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. Consumers are demanding lower-priced goods, and China, determined to keep its export machine humming, is finding ways 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 percent of U.S. imports came from China. Over the same period this year, 19 percent did. Meanwhile, Canada's share of American imports fell to 14.5 percent, from nearly 17 percent.

Besides increasing its share of many U.S. markets, China is increasing the value of exports in absolute terms in some categories. In knit apparel, for instance, U.S. imports from China jumped 10 percent through July of this year -- while America's imports from Mexico, Honduras, Guatemala and El Salvador plunged 19 to 24 percent in each country, according to Global Trade Information Services.

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."

Equally important are government policies that support China's export sector -- from Beijing keeping its currency weak against the dollar to its determination to subsidize exporters through tax credits and billions of dollars in low-interest loans from state-run banks.

China is eager to move up the value chain, by selling higher-priced goods like computer chips, aircraft and pharmaceuticals -- which would bring better-paying jobs and healthier economic growth.

Many economists say that as Chinese consumers become richer, they will buy more of their own goods. And as the dollar falls, it will make U.S. exports more competitive globally. Those trends together could eventually help rebalance global trade.