Trade and investment relationships in global economics

¶ … Investment and Trade Over the Next 30 Years

Perhaps the most notable trend in recent economic history has been the falling-away of the influence of the G7 nations of United States, Japan, Germany, Britain, France, Canada and Italy and the explosion of economic clout in the developing world (What is the G7, 2012, Wise Geek). All eyes are looking to China, in terms of the trending of trade and investment patterns. China is the world's largest potential market, and still has untapped growth in terms of its vast consumer marketplace. That is why the Chinese economy is often seen as a barometer of the health of global demand. For example, in the last quarter, "trade was a net drag on growth last year as the world's second biggest economy turned in its slowest rate of expansion since 2009, at 9.2 per cent, with each quarter's growth in 2011 successively weaker than the previous three months" and China returned to an export-led trade surplus (Edwards 2012: 1). Worries about another global recession have caused Chinese consumers, whom have always been less free-spending than their Western counterparts, to curtail their spending habits.

One threat to the world economy, but particularly to China is the "risks of recession in the debt-ridden European Union" because it is China's largest export market (Edwards 2012: 2). Originally, the EU was heralded as possessing the ability to become an economic powerhouse to rival that of both the U.S. And China. However, the Greek debt crisis and the instability of its weaker economic components, particularly in Southern Europe, have called into serious question the functionality of a united Europe. The failure of the EU to deliver upon its promise will not only have an immediate impact upon the world economy, but will also affect all EU nations in terms of banks and bondholders' view of the relative soundness and stability of member nations for years to come. Morgan Stanley and other major investment firms have announced that they have reduced their net exposure to five of Europe's most indebted nations and will continue to do so over the course of the next few years (Umar 2012).

Overall, China's future looks far brighter than that of Europe's, and even if China's export market is impacted by a long, slow-burn EU recession, China itself still offers one of the strongest markets for global investment. Agriculture is likely to be a particularly promising source for foreign investment in China, to feed the nation's burgeoning population: "China does not have sufficient land and water resources to meet the food needs of the growing population...the government have set its third highest spending on agriculture. The resource and agricultural system limitations are resulting in China's support of international investment in agricultural and food production, including in the U.S., and significant investment resources are available" (Keller 2012).

Despite criticisms of the nation's high levels of pollution, China is also one of the few nations to continue to show investment growth in green technology. Elsewhere, shakiness in the world economy has hit green industry hard: "Global venture capital investment in green technology companies fell 30%, to $1.53 billion, in the third quarter of 2010 or 11% below the year-ago quarter" but green investment in China "jumped to $153 million in the third quarter from $30 million in the second quarter of 2010" (Woody 2010). Investors in other nations remain wary of the ability of green technology to show a secure ROI, even if it is politically popular. If green technology does realize its promise, this could be another boon for China.