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The continued growth of China’s economy is expected to turn it into the most significant economic power in global trade. In this section we examine the impact of this process on Israel’s exports to China. We have found that the growth of China’s imports will make it possible to double China’s share in Israel’s exports, from 5 percent currently to 10 percent in 2035. Israel’s share of Chinese imports is expected to remain constant in the future, because Israeli exports are not sensitive to changes in the level of development of destination countries, and because based on previous experience, the composition of imports in East Asian countries (Japan, South Korea and Taiwan) did not change markedly as a result of their development processes. Israel’s share of China’s imports has been maintained in recent years, which is an achievement in view of the increasing shift of Chinese trade to within the Asian bloc. However, this success has been limited to just two industries: fertilizers and electronics (electronic components). It is therefore important to develop additional export fields, such as environmental, agricultural and water technologies—areas in which China has a need and Israel has a relative advantage.
Global trade’s center of gravity is expected to shift in the next few years, and developing economies will constitute the dominant force in international trade. The most prominent among the developing economies (by far) is China[1], and it will turn into the most significant economic power in global trade. Currently, China is the largest exporter of goods in the world, and the second largest importer after the US. According to a forecast published recently by the World Trade Organization, China will continue to grow rapidly, and its share of global trade of goods will increase from the current 15 percent to 24 percent in about two decades. The weights of Europe and the US are expected to decline from about 30 percent to about 20 percent. Israel has widespread trade links with Europe and the US, while the volume of trade with China and the other developing economies is smaller. As such, it is important to assess the potential of expanding trade between Israel and China, and to adopt an appropriate policy.
A simulation of the development of global trade, assuming that Israeli exports maintain their current market share among imports of the destination countries (Table 1), indicates that by 2035, Israel’s share of global trade will decline, and the weight of exports to China will double to 10 percent, further to the trend in which the composition of Israeli trade has undergone a significant shift toward developing economies in the past decade.
[1] According to the World Trade Organization, China’s GDP will account for 20 percent of global GDP in 2035, and India’s GDP will be about 6 percent.