Behind China's trade surplus with United States
Updated: 2010-12-06 10:26
WASHINGTON - For an iPod player that is assembled in China and sold in the United States at a price of $299, its corporate headquarters in the United States would get $163 and Chinese laborers $4. But every iPod player would add $150 to China's trade surplus with the United States.
This inconvenient truth behind China's trade surplus is often "ignored" by US politicians, who would point a finger at China for trade imbalances with the United States.
The iPod case was given by researchers at the University of California. Barry Bosworth of the Brookings Institution was another scholar who would not ignore the basic facts about China's trade surplus with the United States. He found that the rate of return of the iPhone, another product of the Apple Incorporation, was as high as 60 percent. But the assembly in China represented only seven percent of its total cost. It is not hard to find out what Chinese laborers could get was nominal.
These cases show that US companies that have operations in China, instead of Chinese, are the biggest winners in US-China trade. The Chinese side, at the same time, takes the blame for causing trade imbalances.
China's trade surplus with the United States is as high as $27.8 billion in September, 2010, according to the US Department of Commerce. But China's trade surplus mainly comes from processing or products of foreign-funded companies in China, which are fattening foreign companies.
As a matter of fact, in China-US trade, China had a surplus in processing, but a deficit in general trade. It had a surplus in trade of goods, but a deficit in trade of services.
According to statistics, between 2004 and 2008, US surplus in trade of services with China registered an average annual growth of 35.4 percent, much higher than the growth rate of China's surplus in trade in goods during the same period.
It means that the structural characteristics of China-US trade is determined by economic globalization, international industry transfers and comparative advantages of China and the United States.
It is unreasonable for some people to link US unemployment with China's trade surplus with the country, because US companies would move out of the country for cheap labor anyway.
Trade imbalances, of course, need to be addressed. On the one hand, China needs to continue to increase imports from the United States. But Washington, on the other hand, should recognize China's market economy status and loosen restrictions on export of US products to China.
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