Wal-Mart, China's Fifth Largest Trading Partner

In my first lecture for my Economics 200 class at Mountain View High School this past fall, I tried to give the students an idea of the immense size of the U.S. economy by listing the following statistics:

2002 Gross Domestic Product (GDP) of the U.S. was ten trillion, four hundred billion dollars ($10,400,000,000,000).

The total Gross Domestic Product for the world for 2002 was $49 trillion dollars – meaning that the U.S. produces over one-fifth of the world's output.

If we divide the World GDP of $49 trillion by its population which is 6 billion, 3.4 million people we get a per person (or per capita) figure of $7,775 (the amount each person on earth would receive if the World GDP was evenly divided).

If we divide the $10 trillion U.S. GDP by its population of 300 million people, we get a per person GDP of just under $36 thousand.

You can see that the U.S. has a huge economy and is extremely wealthy in terms of goods and services produced and available here. But additional comparisons get even more interesting.

The second largest GDP is China with $5 trillion 700 billion ($5,700,000,000,000) but with its population of just under 1 billion 300 million people we get per capita GDP of only $4,429. China has a very large population so it can produce a lot. But, unlike the U.S., China lacks capital so its output per person is a fraction of that of the U.S.

If it were an independent nation rather than a part of the United States, California with its total output of $1 trillion, 352 billion would be the ninth largest economy in the world. Dividing its output by its population of 34.5 million people we get a per person GDP for California of $39,187 making Californians richer on average than the rest of the people in the U.S. What is more interesting is the fact that if California were to leave the U.S. and become an independent nation the U.S. would remain the largest economy in the world even after California's GDP was subtracted.

In my lecture I then took the analysis a step further by pointing out that Wal-Mart, whose annual revenues of almost $220 billion make it not only the world's largest corporation but also would rank it as the 36th largest economy in the world (with annual revenue being the corporate equivalent of a nation's GDP). Again, if Wal-Mart were to become an independent nation along with California and its revenue removed from the U.S., the remaining U.S. GDP would still be the largest in the world.

Now, in its November 17th issue, the Wall Street Journal described the impact of Wal-Mart's purchases from China on world financial markets. In an article entitled How Wal-Mart Treads Heavily in Foreign-Exchange Forest (by Robert Flint, page C3) Wal-Mart comes across as a major trading power whose purchases are greater than the imports of most nations.

According to the article, in the fiscal year ending January 31, 2004 Wal-Mart purchased $15 Billion in goods from China. This was 10% of the total U.S. imports from China. The volume of Wal-Mart purchases in China make it the fifth largest importer of Chinese goods in the world. In other words, Wal-Mart is China's fifth largest trading partner placing it ahead of nations like Great Britain and Russia. And while Wal-Mart imports from China are more than those of most other nations, its imports are only 10% of the total U.S. imports from China.