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China Watch: China Denies Overtaking the US as World's No. 1 Trading Nation


Total and General Motors also make the news.

It was widely reported this week that China has surpassed the US to become the world's largest trading nation, based on total exports and imports in 2012. The US had held this position since the end of World War II.

Last week, the US Commerce Department said that US exports and imports of goods in 2012 came up to $3.82 trillion. In contrast, China's customs administration had earlier announced that the mainland's 2012 total trade totaled $3.87 trillion.

"It is remarkable that an economy that is only a fraction of the size of the US economy has a larger trading volume," Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, told Bloomberg. "The surpassing of the US is not because of a substantially undervalued currency that has led to an export boom," Lardy added, noting that Chinese imports have grown relatively faster than exports since 2007.

"The main reason for this growth is the Chinese government policy directed at stimulating domestic demand, which improves imports to growth," Andrey Shenk, an economic expert at Investcafe, told RT.

China managed a full-year trade surplus of $231.1 billion last year, while the US posted a total trade deficit of $727.9 billion.

Chinese officials, however, have come out to deny that China has overtaken the US in trading. A Ministry of Commerce (MOC) spokesperson told China's state-owned Xinhua news agency that the US's total 2012 trade volume would still be higher than China's if it were calculated using the same method.

The MOC spokesperson said that the US Commerce Department derived its trade total using two methods. Based on international balance of payments, total trade was $3.82 trillion, as reported. Based on the measurement adopted by the World Trade Organization, which China also uses, the US's 2012 trade came up to $3.882 trillion, which is still higher than China's total.

Still, given that China's trade expansion is still going strong, it's likely that the country will definitively overtake the US this year.

Here is this week's business news:
CNOOC (NYSE:CEO): Another hurdle in the attempt by China's state-owned CNOOC to buy Canadian oil company Nexen (NYSE:NXY) was cleared this week after US regulators approved the acquisition.

The deal had been approved by Canadian authorities already but it still required US approval because Nexen has assets in the Gulf of Mexico.

"The approval from the Committee on Foreign Investment in the United States (CFIUS) means the last major hurdle was cleared," said CNOOC in a statement released Tuesday, according to Xinhua. Shares of Nexen jumped 2% after the US regulatory approval was announced,

The firm said that it now aims to complete the deal in the next two weeks.

Total (NYSE:TOT): French oil and gas giant Total is in talks to partner with a Chinese company for shale gas exploration in the mainland, said the company's head of exploration and production, Yves-Louis Darricarrere, though he did not confirm the identity of Total's partner.

"The geology is more complex in China, and it needs foreign technology," Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong, told Bloomberg. "China would welcome Total's experience overseas to expedite development of what is estimated to be the world's largest shale gas resources."

With at least 25.1 trillion cubic meters (886 trillion cubic feet) in shale reserves, China has become the new go-to destination after the US for companies seeking to exploit the shale boom Total has to look abroad for shale gas opportunities because of a domestic ban on hydraulic fracking.

In December, Sinopec and ConocoPhillips (NYSE:COP) also inked a shale gas exploration and production deal in the Sichuan basin of China, while Royal Dutch Shell (NYSE:RDS.A) and China National Petroleum Corp also partnered up last March.

General Motors (NYSE:GM): The China market was the sole bright spot amidst a sea of losses for GM during the recent financial crisis, and though the company's domestic sales have recovered, China remains a key revenue source.

Together with its Chinese joint ventures, GM sold a record 2.84 million vehicles in China in 2012, narrowly edging out Volkswagen (PINK:VLKAY) (2.81 million) as the top foreign carmaker in the country. The two Western brands have benefited from the slump that hit Toyota (NYSE:TM), Honda (NYSE:HMC) and Nissan (PINK:NSANY) over recent anti-Japan sentiments linked to a Sino-Japan territorial dispute.

To maintain its slender advantage over Volkswagen, GM plans to increase production capacity.

"We commissioned two new assembly plants last year, and we broke ground on two additional plants. They'll be online in 2014. With our two new plants, we upped our production capacity last year by 20%. We are here to compete, plain and simple," GM's China head, Bob Socia, told Advertising Age.

Earlier in the week, GM also announced that it will repurchase from its Chinese partner SAIC a 1% stake, restoring the duo's 50-50 joint venture. In 2009, GM had ceded control of the venture to SAIC in exchange for a loan and some cash to stem the effects of the financial crisis.

Japanese electronics companies: While Japanese auto companies have stumbled thanks to the rise of anti-Japan sentiment in China in recent months, their electronics counterparts, have thrived.

Businessweek reported that Panasonic (NYSE:PC) and Sharp (PINK:SHCAY) are both enjoying strong surges in sales of air purifiers, thanks to the well-documented pollution woes in the mainland, especially Beijing, China's capital city. Panasonic produced 50% more air purifiers for the Chinese market in January compared to a year earlier, while Sharp's January sales jumped 300% year-on-year.

"The spike in demand may help Panasonic and Sharp," Mitsuo Shimizu, a Tokyo-based analyst at Iwai Cosmo Holdings, told Bloomberg. "The Japanese companies have good technology."

Both Panasonic and Sharp still face an uphill struggle in their efforts to become profitable once again. Sharp projects a record 450 billion yen ($4.8 billion) loss for the fiscal year ending March 31, while Panasonic forecasts a 765 billion yen ($8.25 billion) loss for fiscal 2013.

Twitter: @sterlingwong
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