"Made In China" To Replace The United States?

China's trade surplus rose to nearly $31 billion 500 million in July - the highest level since January 2009 - which could trigger a new round of hysterical complaints about unfairly undervalued yuan. But in the United States Politician We should consider the findings of a recent research report of the Federal Reserve Bank of San Francisco before making a clear view of the problem.

Galina Hale, a senior economist at the Federal Reserve Bank of San Francisco, and Bart Hopkin, a research consultant, argue that the share of Chinese made goods in the US consumer goods market is much lower than widely believed.

By analyzing data from the US Department of Commerce, the Bureau of labor statistics and the Census Bureau, they found that American families consumption Of the goods and services, 88.5% came from the United States. In the remaining 11.5% of imports, made in China commodity Just over 1/4, that is to say, it accounts for only 2.7% of the total consumption expenditure in the United States.

Even this data exaggerates the actual share of imports from China in the overall consumption expenditure of the United States. Why? Because almost all the manufacturing of consumer goods involves many links. Accurate statistics of where different parts are produced will further reduce the share of "made in China" goods.

For this reason, hale and Hopkin's explanation is: obviously, if a pair of sports shoes made in China sells for 70 dollars in the US, the 70 US dollars are not all Chinese manufacturers. In fact, most of the retail price will be used to pay for the transportation of shoes to the United States, the rental of the stores that sell them, the dividends of American retailers and the marketing cost of sports shoes. These costs include salaries, wages and benefits for the staff and management of the United States related to the marketing process.

According to statistics from the Federal Reserve Bank of San Francisco, the average price of imported goods is 36% to American companies and employees, which is even higher for goods imported from China.

Hale and Hopkin wrote: "on average, 55 cents of every $1 spent on" made in China "goods go to the US service industry. In other words, "made in China" accounts for about 55% of the us part.

That makes the problem more complicated. In 88.5%, this contribution also includes the "made in China" part of consumer spending on manufactured goods in the United States. Adding this to it, hale and Hopkin concluded that the total share of "made in China" goods in US household consumption is only 1.9%.

What does this mean? It's both good news and bad news. Well, it's an exaggeration of the "China Threat Theory" that is so terrible in the political debate in the United States. The proportion of China's exports in the total consumption of the United States may increase rapidly, but it is still negligible in total. American employees and enterprises have also gained considerable benefits.

The bad news is that some people believe that the appreciation of the renminbi can create more room for American manufacturers in the local market - the space is saturated - this hope seems to be more unreliable. If the majority of the cost of "made in China" imports has actually contributed to American employees and enterprises, the appreciation of the renminbi will only have a limited impact on the competitiveness of US manufacturers.

From an economic point of view, a small share of "made in China" has another advantage, which means that inflation in China has limited impact on pushing up US commodity prices.