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Thursday, February 09, 2006

Free Assembly

This article argues that trade figures for China are misleading indicators of its global competitiveness:

Some Assembly Needed: China as Asia Factory, by David Barboza, NY Times: ...[O]ften these days, "made in China" is mostly made elsewhere — by multinational companies in Japan, South Korea, Taiwan and the United States that are using China as the final assembly station in their vast global production networks. Analysts say this evolving global supply chain, which usually tags goods at their final assembly stop, is increasingly distorting global trade figures and has the effect of turning China into a bigger trade threat than it may actually be...

It may look as if China is getting the big payoff from trade. But over all, some of the biggest winners are consumers in the United States and other advanced economies who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China. American multinational corporations and other foreign companies, including retailers, are the largely invisible hands behind the factories pumping out these inexpensive goods. And they are reaping the bulk of profits from the trade...

The real losers, it seems, are mostly low-wage workers elsewhere, like ... in Japan, along with workers in other parts of Asia who suffered as employers began relocating plants to China. Blue-collar workers in the United States have also lost out. ... "The biggest beneficiary of all this is the United States," said Dong Tao, an economist at UBS in Hong Kong. "A Barbie doll costs $20, but China only gets about 35 cents of that." Because so many different hands in different places touch a particular product, Mr. Dong said, you might as well throw away the trade figures. "In a globalized world, bilateral trade figures are irrelevant," he argued...

And so while China has something in the range of a $200 billion trade surplus with the United States, it also has a $137 billion trade deficit with the rest of Asia... Chinese officials rarely miss an opportunity to argue that the trade statistics showing huge surpluses are misleading indicators of the country's prosperity. "What China got in the past few years is only some pretty figures," said Mei Xinyu, of the Commerce Ministry's research institute. "American and foreign companies have gotten the real profit."...

This point is explored further here.

    Posted by on Thursday, February 9, 2006 at 01:03 AM in China, Economics, International Trade | Permalink  TrackBack (0)  Comments (17)


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