In globalized economy, trade hard to count

By Lin Liyao
0 Comment(s)Print E-mail China.org.cn, November 1, 2011
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Research shows that the wholesale price of each iPhone is US$178.96. Of the many countries that contribute to its production, Japan, German and South Korea earn 34, 17 and 13 percent of that sum through manufacturing components and parts. Chinese assembly factories take home a mere 3.6 percent, or about US$6.5.

But using the current trade statistics methodology, the entire US$178.96 price tag is credited to China's export account.

According to Chinese customs data, China's exports totaled US$1.39 trillion in the first three quarters of this year, with a trade surplus of US$107.1 billion.

In most people's eyes, that trade surplus means the country made money. A surplus means we earned money from trade, and a big surplus means we cleaned up. That perception, however, is not correct.

At a recent seminar held by China's Ministry of Commerce and the World Trade Organization, industry insiders pointed out that traditional statistical methods used to keep track of international trade have severely distorted the facts. China's big trade surplus no longer accurately reflects the reality of global commerce.

China's surplus, other countries' profit

With economic globalization, manufacturers of information technology products have become increasingly specialized. More and more products are produced in stages across a number of countries. In the global division of labor, China, with its relatively low manufacturing costs, has become an assembly center for mobile phones, computers, MP3 players and other electronic products.

Wu Haijun, chairman of Hasee Computer, said the factory price of a Dell or HP laptop assembled in China is about US$300 to 400. Intel earns 30 percent on the CPU and chipset; circuit boards, LCD screens, hard drives and other components account for another 60 percent, while Chinese factories only get about 5 percent of the factory price.

But just like the iPhone, the full price tag of the computer is recorded as a Chinese export, not just the small percentage Chinese manufacturers earn.

In 2009, 11.3 million iPhone was sold in America, accruing China exports worth US$2.02 billion. Deducting the US$121.5 million of American components imported for use in the handsets, the iPhone trade surplus China ran with the U.S. in that year was US$1.9 billion. In reality, however, the actual value Chinese assemblers added was only US$73.5 million. The rest of that surplus reflected the value of parts produced by a handful of other countries.

At present, processing trade is a core component of China's export industry. Numerous products are finished in Chinese assembly plants. As a result, using current statistical methods, China's trade surplus with a number of nations is overestimated, while the lion's share of profits goes to other countries.

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