Understanding China’s Trading Nation

A trading nation is a nation in which foreign trade constitutes a high percentage of its gross domestic product. When compared to the overall size of the nation, trading shares of foreign companies are found to comprise about 40% of its gross domestic product or GDP. Trading nations are often found in the emerging world economies such as India, China and Brazil; they have been playing a key role in the global trade system by providing state-of-the-art and accessible financial infrastructures to businesses wishing to establish international business contacts.

Trading Nation

There are two types of trading nations – those that have a fixed currency and those that are flexible. A trading nation that has a fixed exchange rate for its exports and imports is called a fixed economy. A trading nation that is flexible means that it is free to change its exchange rates for its exports and imports, depending on the economic situation on the ground. Most of the developed countries around the world have a flexible trading nation policy. This policy allows them to open their markets to international trade and enables them to cater to the needs of global consumers by offering a wide range of goods and services. On the other hand, developing countries that have a fixed exchange rate for their exports and imports have a closed economy, which limits the scope for international trade.

A trading nation’s foreign trade depends on its ability to secure raw materials like oil, timber and iron ore at the lowest possible price. This helps the nation to develop consumer products and strengthen its economy. Many developing nations have been dependent on exports of basic food items, which have helped them in building up their infrastructures. However, most developing nations face serious challenges in terms of accessing international trade.

The United States has identified some important issues that affect the functioning of a trading nation. These issues include the inability to establish strategic alliances with other countries, the inability to protect its industrial base from foreign competition, the inability to encourage high levels of productivity in less developed sectors, and the inability to successfully police its shipping routes. To overcome these issues, the United States is trying to improve the overall condition of the American economy through effective management of these dilemmas.

The development of the global market has resulted in the emergence of a number of trading nations. Some of these nations are emerging as trade deals with the United States are finalised. Other nations may opt for bilateral free trade deals with the United States to increase the volume of exports, while other countries may opt for multilateral deals or associate agreements to reduce trade barriers. Since bilateral free trade deals are temporary solutions, it is difficult to predict the impact of such agreements on the overall US economy.

Chinese exports to the United States have been increasing steadily over the past few years. China’s rise as a major exporter of industrial goods has also helped it build its own global trading platform. Over the past few years, China has made important improvements in its domestic food manufacturing system, improved its bureaucratic framework, and launched a series of ambitious reform measures to attract global investment. However, the US still remains the largest creditor to China. As the Chinese government continues to pursue reform objectives in pursuit of greater foreign participation in its economic policies, the volume of US exports to China will remain low, but that should not prevent the United States from pursuing its own agenda of liberalisation in the international trade system.

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