China joined the World Trade Organization in 2011 and overtook the United States in 2013 to become the world’s largest trading nation. Its trading volume hit a record high of $4.16 trillion, $0.25 trillion higher than the U.S volume.

As the second largest economy and the leader in global trade, what happens in China doesn’t stay in China — it affects the rest of the world. So the country's recent slowdown in economic growth (much slower than even expected) has significant implications for the global economy but will have the greatest impact on China’s main trading partners: the U.S., Hong Kong, and Japan.

The United States

At $17.419 trillion, the United States boasts the largest economy in the world and is China’s largest trading partner. Last year the total value of bilateral trade between the two countries was $590.4 billion, with U.S. imports from China valued at $466.7 billion and U.S. exports to China valued at $123.7 billion.

The top three exports from the U.S. to China and their total values for 2014 were oil seed, fruit, grain, seed, etc. ($14.9 billion); unspecified commodities ($14.9 billion); and vehicles other than railway and tramway ($13.3 billion).

The top three U.S. imports from China and their total values for 2014 were electrical and electronic equipment ($127.1 billion); machinery, nuclear reactors, boilers, etc. ($105.3 billion); and furniture, lighting, signs, prefabricated buildings ($25.5 billion).

The bilateral trade surplus that China runs with the United States may be exacerbated by China's slowdown. Not only will a slower growing Chinese economy translate into weaker demand for U.S. goods, but the recent devaluation of the yuan, by making Chinese goods cheaper for America, could increase U.S. imports from China. This won't sit well with a number of U.S. policymakers already critical of the large trade deficit vis-à-vis China. (See also Is China's Economic Collapse Good for the U.S.?)

Hong Kong

At $290.9 billion, Hong Kong is only the world’s 38th largest economy but is tightly integrated with the economy of its closest neighbor, making it China’s second largest trade partner. In 2014, the total value of bilateral trade between the two regions was $568.7 billion, with Hong Kong’s imports from China valued at $268.3 billion and Hong Kong’s exports to China valued at $300.4 billion.

Hong Kong’s top three exports to China and their total values for 2014 were electrical and electronic equipment ($151.9 billion); pearls, precious stones, metals, coins, etc. ($50.1 billion); and machinery, nuclear reactors, boilers, etc. ($44.7 billion).

Hong Kong’s top three imports from China and their total values for 2014 were electrical and electronic equipment ($135.6 billion); machinery, nuclear reactors, boilers, etc. ($39 billion); and pearls, precious stones, metals, coins, etc. ($19.1 billion).

With about 57 percent of Hong Kong’s total exports going to China and about 45 percent of its total imports coming from China, Hong Kong’s economy is intimately wound with that of China’s. Slow growth in China will no doubt put downward pressure on Hong Kong’s own economic growth. To make matters worse, Hong Kong’s 32-year-old currency peg to the U.S. dollar means that, if the U.S. Federal Reserve raises interest rates later this year, Hong Kong will have to follow suit or give up the peg. This could further dampen its economy. (See also Hong Kong and China’s Touchy Ties)

Japan

Japan is number three: It is both the third largest economy in the world at $4.6 trillion and China’s third largest trading partner. In 2014, the total value of bilateral trade between the two countries was $306.7 billion with Japanese imports from China valued at $181.7 billion and Japanese exports to China valued at $125 billion.

Japan’s top three exports to China and their total values for 2014 were electrical and electronic equipment ($25.8 billion); machinery, nuclear reactors, boilers, etc. ($24.3 billion); and vehicles other than railway and tramway ($12.8 billion).

Japan’s top three imports from China and their total values for 2014 were electrical and electronic equipment ($50.8 billion); machinery, nuclear reactors, boilers, etc. ($31.8 billion); and articles of apparel, accessories, knit or crochet ($11.1 billion).

China’s slowdown is being felt as Japanese exports to China fell by 4.6 percent in August from last year. Although exports to the United States are improving, overall exports slowed for the second straight month. Japanese officials had been expecting a recovery from last year’s recession, but with Chinese growth weaker than expected, there are fears that the recovery could be derailed.

The Bottom Line

As the second largest economy in the world and the largest trading country worldwide, China’s global importance cannot be underestimated. Although its biggest trading partner — the United States — has shown signs of strength in the last year, earlier this month the Federal Reserve opted to avoid raising interest rates when it became apparent that a slowing Chinese economy could be much more severe than anticipated. China’s second largest trading partner, Hong Kong, will feel the downward pull on its own economy from both China’s slowdown and its close monetary ties to the United States, where the dollar has been improving. Japan, China’s third largest trading partner, faces tough headwinds from a Chinese slowdown at a time when it's trying to pull itself out of recession.   

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