Export numbers blind over US company branches in China

Source:Global Times Published: 2018/4/3 7:50:42

In a report released by Deutsch Bank on March 27, figures revealed that General Motors, Apple, and other US companies manufactured and sold a combined total of $223 billion in goods through their Chinese branches in 2015. This figure was not factored into Sino-US trade numbers. 

The German bank report also indicated the total revenue earned from US exports to China and revenue earned from its branch sales in China added up to $373 billion, despite Chinese companies achieving $403 billion in the US market. The number means the trade deficit lands at $30 billion, a far cry from the $365.7 billion figure originally claimed by Washington.

One of the major disputes in Sino-US trade is that two countries use different methods to calculate bilateral trade balances. Although each calculation has its own reasoning, the two nations happen to be closer in cooperative bilateral trade efforts than in recent years. Chinese money takes up a large share of foreign investment in the US, so when discussions arise over the disparities among trade balances, this must be taken into account. 

If the calculation is based on the numbers from cargo clearance and customs entry and used to measure economic relations between China and the US, then the conclusion will be one-sided, even ridiculous.

Outside of the subsidiaries factor covered by Deutsch Bank, other factors involved in Sino-US trade relations include the position of China's economy in the middle to lower end of the global value chain. There are a few Japanese and Korean-made products sent to the US included with China's exports, even though they are only assembled in China.

Moreover, Washington's calculations on China imports to the US usually include cargo transported from the Chinese Mainland to Hong Kong, and then shipped to the US. But when calculating US exports to China, Washington uses different number crunching methods to calculate export data between the Mainland and Hong Kong. In doing so, Hong Kong finds itself excluded from the total export figures that flow from the US to China. 

Bilateral trade deficits between China and the US, therefore, have increased.

The US trade deficit with China usually refers to goods traded between the two. Now the US is experiencing a rapidly growing surplus in trade services with China. From 2011 to 2016, the Sino-US trade service deficit jumped from $6.77 billion to $55.69 billion, with an average annual growth rate of 52.4 percent.

When it comes to trade, the US and China reap different profit margins. In bilateral trade with the US, China is strong in quantity and weak in terms of profit. In contrast, US products are high in average added value and more profitable in the Chinese market. 

Scholars have argued the end result of the US taking a trade deficit from China would be groundless, even if overall costs such as local prices, labor costs and products added value are taken into consideration. The reality is that China has earned more in trade surplus while the US is taking a bite out of surplus interest.

Meanwhile, the aforementioned factors have helped determine an overall interest balance, as the purpose of trade is meant to benefit both sides. 

If Sino-US trade only benefits China while harming the US, like the Trump administration described, then it would be impossible for their trade to grow in the coming years. The previous US administration would have certainly reduced the scope of Sino-US trade. 

If companies like GM and Apple build factories in China, then they are the ones hurting the US economy. Perhaps it is time multinational corporations find a different way to make money. 

Washington is obsessed with its calculation methods used to determine a trade deficit and continues to ignore other factors. The Trump administration is neither lacking in judges on the current economic situation, nor are they inexperienced in matters pertaining to international trade cooperation.

It seems Washington understands the nature of disputes while deliberately exaggerating the seriousness of a trade deficit. The US is hitting its global business partners with import tariffs in an attempt to rebuild trade relations with other countries through its own will. By imposing extortionary policies, the US is able to reap as much as it can from foreign economies and markets.

China is not trying to take advantage of the US market. Instead, China is the victim of Washington's false accusations regarding "economic aggression." Small nations might be intimidated by aggressive US posturing and later forced to accept its overlord terms, but that would never happen in China. 

China will utilize necessary measures to protect its rights and interests and will respond with tit-for-tat policies against any form of aggressive US behavior. 

China is, and always will be, confident enough to face any challenge. If the Chinese market became more conservative for US companies, giants like GM and Apple would be affected the most as they highly depend on Chinese subsidies to increase sales. 

The prospects for high-end US service industries are dim. The death of Sino-US bilateral trade relations may hurt Chinese companies out of the gate but solely based on the size of China's enormous market it would eventually turn the tide and watch the US market taste the bitterness of isolationism in the long run.

It is difficult to believe the US government would practice economic isolationism in this day and age, cutting itself off from the interconnected interests of global economic cooperation. 

At present, cooperative development is the main theme for the world's economy. History moves forward independent of man's will so it is wise to learn from it, rather than fight against it.



Posted in: EDITORIAL

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