Chapter 2. On Trade Surplus from Property Rights 35
3.10 Virtual Output Value of Raw Materials
As raw materials are sold at different prices in the world, ambiguity can occur if the price in the local place is taken. To overcome this drawback, a group of virtual international market prices is selected to
Interpreting the Economic Scale of China 95
be multiplied by the outputs of raw materials of different countries to obtain a group of data called “the virtual output value of raw mate- rials.” In fact, the data do not exist in any statistical information.
The innovation of the present study can be explained as how much they are worth if all the raw materials in the country are placed in the international market for sale. That is,
V = pãX,
whereV is the virtual output value of raw materials,X is the quan- tity of raw materials, and pis the set of virtual international prices.
Regardless of whether the products are made in the U.S., China, or Zimbabwe, each type of product corresponds to a price. For example, rice in China can be cheaper than that in the U.S., but it is priced at
$207 per ton in the model. This point is consistent with the principle of the PPP. The price can be taken from the average price of interna- tional trades over years or be referred to that in the Chicago futures market. This set of prices is the relative price among all kinds of raw materials and energies. It should be different from the actual price of a particular country. Nevertheless, as it is used for all countries, it is fair to all of them regardless whether it is high or low.
As all countries in the world select the same variety of raw materi- als, the selection of different commodities will not produce any benefit or adverse effect on the estimate of the GDP of a country.
The raw materials and energies selected in this research are as follows:
Nineteen categories of agricultural products, namely, sugar, tea, wheat, soybean, barley, rice, cotton, peanut, rapeseed, oat, beef, mutton, wool, hemp, rubber, timber, wood, phosphate fertilizer, and potash fertilizer.
Thirteen categories of industrial raw materials, namely, cement, iron ore, steel, aluminum, copper, nickel, zinc, lead, tin, coal, crude oil, natural gas, and electricity.
These items were selected because they are produced by all coun- tries in the world and have complete data (including quantity and
96 From Trade Surplus to the Dispute over the Exchange Rate
price). A few additional or missing items will not change the research conclusion.
Aside from China, 36 other countries having more than 3 mil- lion people and complete economic departments are selected. City economies, such as Hong Kong and Singapore, are not included.
These sample countries are very open and have complete statistical data so their GDPs are more reliable. Petroleum-exporting countries are not included.
Among the countries included, 12 are Asian countries (i.e., India, Japan, Israel, South Korea, the Philippines, Thailand, Malaysia, Bangladesh, Indonesia, Iran, Pakistan, and Turkey); 12 are European countries (the United Kingdom, France, Germany, Romania, Poland, Norway, Spain, Hungary, Italy, Austria, Finland, and Greece); three are African countries (i.e., Algeria, Egypt, and Zimbabwe); four are Latin American countries (i.e., Chile, Peru, Argentina, and Brazil);
three are North American countries (i.e., the U.S., Canada, and Mex- ico); and two are in Oceania (i.e., Australia and New Zealand).
These countries include developed and developing ones. The sci- entific, technological, and economic development levels of the U.S., Japan, Germany, and the United Kingdom are higher than those of China. Egypt, Algeria, and Zimbabwe are obviously less developed than China. Turkey, Romania, the Philippines, Thailand, and China are in a similar stage of development. Our goal is to determine the GDP scale of China through international comparison.
As presented in Table 3.13, China ranks the first in many raw materials, energies, and agricultural products. For example, steel pro- duction in China ranked first in the world and was far ahead of the others in 2010; its crude steel production was greater than the sum of that of countries ranking from 2nd to 10th in the world; its cement production was also greater than the sum of that of countries rank- ing from 2nd to 10th; its agricultural products, such as wheat, rice, peanut, and rapeseed, ranked first in the world. The outputs of its other agricultural products also ranked first in the world. Moreover, China led in the virtual raw material production in the world. How- ever, the GDP of China depends on its processing depth coefficient. A higher processing depth coefficient corresponds to a greater GDP of
Interpreting the Economic Scale of China 97
Table 3.13: Rankings of the outputs of the main industrial products (2010).
Electricity
Crude steel Cement Coal Crude oil (100 million Fertilizer13 (million (million (million (million kilowatt- 10000
tons) tons) tons) tons) hours) tons)
1 626.7 2000 32.4 5.051 43259 46087
China China China Russia The U.S. China
2 109.6 210 9.85 4.678 42065 13628
Japan India The U.S. Saudi Arabia China Russia
3 80.6 72 5.70 3.391 11453 8035
The U.S. Iran India The U.S. Japan Germany
4 67.0 68.4 4.24 2.032 10368 5695
Russia The U.S. Australia Iran Russia White Russia
5 66.8 64 3.17 2.030 9222 4708
India Turkey Russia China India Poland
6 58.5 62.6 3.06 1.628 6299 4435
South Korea Brazil Indonesia Canada Canada Brazil
7 43.8 52 2.54 1.463 6210 3727
Germany Russia South Africa Mexico Germany Dominica
8 33.6 50 1.82 1.308 5732 2703
Ukraine Vietnam Germany UAE France Ukraine
9 32.8 47 1.33 1.266 4972 1900
Brazil Japan Poland Venezuela South Korea Iran
10 29.0 46 1.11 1.225 4848 1452
Turkey South Korea Kazakhstan Kuwait Brazil Turkey Data Specification:∗India’s cement data were calculated in 2007.
Source: Industrial commodity statistics of the UN, http://unstats.un.org/unsd/
industry/.
China. Although the exact processing depth coefficient is unclear, the following judgment can be made without hesitation. The processing depth coefficient of China is lower than that of the U.S., Japan, and other developed countries but is higher than that of Zimbabwe, the Philippines, and other developing countries.
13Indicated here are the fertilizer statistics in 2008, including mineral and chem- ical potash, mineral and chemical nitrogenous, and mineral and chemical phosphate fertilizers.
98 From Trade Surplus to the Dispute over the Exchange Rate
Table 3.14: Rankings of the outputs of the major agricultural products (2010, 10,000 tons).
Meat (Chicken,
Wheat Rice Corn Soybean Peanut Rapeseed Beef)
1 11518 19721 31617 9061 1571 1308 2756
China China The U.S. The U.S. China China The U.S.
2 8071 12062 17754 6852 564 1187 1802
India India China Brazil India Canada China
3 6010 6641 5606 5268 264 641 1793
The U.S. Indonesia Brazil Argentina Nigeria India Brazil
4 4151 4936 2330 1508 188 570 463
Russia Bangladesh Mexico China The U.S. Germany Mexico
5 3821 3999 2268 981 129 482 422
France Vietnam Argentina India Senegal France Argentina
6 2411 3320 1836 746 114 223 422
Germany Burma Indonesia Paraguay Burma The UK Russia
7 2331 3160 1406 435 78 218 339
Pakistan Thailand India Canada Indonesia Australia India
8 2317 1577 1398 182 76 208 280
Canada The Philippines France Uruguay Sudan Poland France
9 2214 1131 1282 168 61 147 236
Australia Brazil South Africa Ukraine Argentina Ukraine South Africa
10 1966 1103 1195 164 53 111 226
Turkey The U.S. Ukraine Bolivia Ghana The U.S. The UK Source: Food and Agriculture Organization of the United Nations.