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Israel : Country benefits from ''''China Effect'''' |
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2004-8-5
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A remarkable 44 percent growth was recorded in Israel''''''''s exports to China last year, climbing to $613 million, according to the Bank of Israel''''''''s half-yearly report on the economy released yesterday.
Exports were mostly in machinery, diamonds, medical equipment and chemicals. The high tech industry accounted for 40 percent of this total.
At the same time, imports from China grew by 27 percent in 2003 to $1 billion, comprising textiles, machinery, steel, rubber and electronics.
The central bank noted quite clearly a ‘China Effect,’ in which the vast country had become the world''''''''s fourth largest trading nation, after seeing its trade grow a phenomenal 300 percent in the 1990s. In 2003 alone, China''''''''s trade grew 37.1 percent, while its GDP grew an impressive 9.1 percent, after jumping 8 percent the year before.
The Bank of Israel''''''''s report noted that Israel''''''''s economy had certainly been impacted by the China Effect.
The rise in China''''''''s supply of labor-intensive products drove the prices of such goods down, thereby benefiting the consumer worldwide. The fast pace of growth in China also pushes the local demand, which should accelerate the country''''''''s imports, particularly in technology products, energy, industrial raw materials and services, the bank says. The report therefore concludes that Israel could benefit greatly from this, by increasing profits for those companies specializing in telecoms and financial services.
The bank believes that China''''''''s increased supply of unskilled labor, while reducing the return on such labor worldwide, could raise the return on capital and skilled labor in other countries. This could impact negatively on those countries with a predominantly unskilled workforce, where unemployment would be expected to grow.
Israel could suffer, the report says, along with other countries, in having to compete with cheaper goods from China, particularly in the Far East market where China is dominant. However given the Chinese growth and expected inflation rates (4 percent in 2004 and 6 percent in 2005), prices of Chinese products could rise in the world. |
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