China – A Journey from Cowries to 8.227 Trillion USD | Trade Samaritan

China – A Journey from Cowries to 8.227 Trillion USD

China was the first country to realize that barter may not be able to suffice the household demand entirely as there were instances of produce returned un-exchanged as all one produces may not be required or exchanged. So China pioneered a medium of exchange in 1200 BC, it introduced cowrie shells as currency.

Origin of trade can be traced way back in 8000 BC and 6000 BC which is known as the early Stone Age period. Barter (trade through exchange) started in Asia, Greece, Africa, Middle East and Turkey approximately at the same time. China was the first country to realize that barter may not be able to suffice the household demand entirely as there were instances of produce returned un-exchanged as all one produces may not be required or exchanged. So China pioneered a medium of exchange in 1200 BC, it introduced cowrie shells as currency. The world adopted cowrie shells which went through phases of stones, shells, ivory, nails, leather, mats, amber, beads, and feathers, ivory, jade, thimbles, yarn and knife shaped coins. China was flourishing at that time and medium of exchange such as cowries and coins started to become very bulky to operate with. So China once again pioneered paper money and the world followed.

There is historical evidence as enlisted in the above paragraph that China has been ahead of its league since Stone Age. And the enormous progress made by China in last 2 decades does not come to us as a surprise. China serves as something which gives us all an adrenaline kick, it has become a role model to the entire world comprising of both developed and developing countries. It always was a role model and when it comes to trade, China has pioneered and contributed to world transformation and progress.

China has a reported a Gross Domestic Product of $ 8.227 trillion (2012) with a range of foreign assets between $200 billion to $ 400 billion not included in its official reserves. China has world’s highest official foreign exchange reserve, $3.3 trillion which way more than US $ home country which holds a reserve of $ 0.146 trillion (2013). This unmatchable progress did not happen in months or years, it took centuries of relentless efforts to rise as a winner.

China GDP – 30 years trend


The steep growth level attained by China over last 3 decades is unparalleled, the most interesting and overwhelming part is that this growth is a sustained growth i.e. a continuous growth. Sustainability is a sign of endurance; China has been able to remain diverse and productive for decades. There is no other country in this world whose GDP curve is wide and steep at the same time. Wide and a steep curve is a sign of sustained growth. Two digit growth rates from 2000 to 2012 is a collective effort of government and citizens.

Year GDP ($ in MM) Growth (%)
2000  1,198,475.00 10.6
2001 1,324,818.00 10.5
2002 1,453,820.00 9.7
2003  1,640,966.00 12.9
2004 1,931,644.00 17.7
2005 2,257,619.00 16.9
2006 2,713,495.00 20.2
2007 3,495,664.00 28.8
2008 4,521,827.00 29.4
2009 4,990,526.00 10.4
2010 5,931,203.00 18.8
2011 7,324,952.00 23.5
2012 8,220,863.00 12.2

The steep year on year rising trend reflecting in the above chart cannot be found at a country level however a similar growth trend can be seen in some of the fortune 500 companies like Wal-Mart, Chevron or Berkshire Hathaway that is because China as a country is run just like a company by its political party – the Communist Party of China. And the president runs the country like any CEO of the company.

China Political Structure

The power is concentrated in the paramount leader (currently Xi Jinping) who is in charge of 3 most critical functions of the country; he is the General Secretary of ruling political party, Chairman of the Military and the President of the People’s Republic of China (Central Bank). Law and Regulations are maintained through comprehensive efforts as the government controls the states, media and military. Labor is supposedly cheap in China but there are strict labor laws and the labor unions are controlled by Government. All the critical functions are controlled and regulated by Government, employment opportunities are created by undertaking huge turnkey projects.  As per the World Bank data, there are at least 700 turnkey projects ongoing in China, to name a few; rural worker training, River basin improvement, Rail project, Infrastructure industry relocation, forest restoration, agricultural development, pulp and paper industry waste reduction, energy efficiency, Eco-city. Here is a quick snapshot of the ongoing projects.

China Projects

China Projects

Theme No. of Projects
Pollution 121
Rural 150
Climate 100
Environment 78
Water 78
Infrastructure 73
Municipal 56
Urban 40
Land 32

Let’s talk about the currency of the country who invented paper money – Chinese Yuan (Renminbi). Yuan is not a freely convertible currency. There are debates going around the world to internationalize the Yuan especially because Yuan today is one of the top 10 currencies in the world (settlements) and China being the second largest economy. China is also the largest exporter and US being its largest market China earns majority of its export proceeds in dollars which are converted into Yuan. China today is facing criticism from the west for not letting its own currency float at a market rate, it is possible to control the exchange rate of a restricted currency by not subjecting it to the free market movement and China has a tendency to undervalue Renminbi. Under valuation of Renminbi helps China’s export sector by making foreign imports more expensive and Chinese exports cheaper in foreign markets. It also encourages outsourcing production and jobs from the United States.

China’s philosophy lies in its implementation of socialist market economy rather than having a free market.

China has state owned operations which in turns facilitate a controlled and a country wide collective response both to domestic as well global crisis. Savings are effectively mobilized and risky businesses such as shadow banks etc. can be kept at bay. Europe and United States function on a free market economy, free market principle has not been consistently favorable at an economic level; US crisis of 2008-2009 and the ongoing Euro crisis. Every coin has two sides, the growing middle class and upper middle class section of China is not entirely in favor of its existing ruling style and controls. The labor and currency restrictions have created some amount of unrest and unhappiness in the economy.

China has displayed stupendous growth over last century; the numbers and the graphs are unparalleled. But are the citizens of China really happy? Achieving steep numbers is not the only responsibility. But there is a long history behind the origin of this structure and no other country has it like China. China is showing some signs of adopting a hybrid model of socialist and free market economy.

The fact remains that China is/has been playing a very unique and dominant role in the world market economy.