Chapter 2. On Trade Surplus from Property Rights 35
2.5 Sino-American Trade Surplus
In 2007, China’s trade surplus against the U.S. amounted to $163.29 billion, accounting for 62.3% of its total trade surplus of $261.83 billion. Because of the particularity and importance of Sino-American trade, independent adjustment should be made on the property rights of Sino-American trade.
In 2007, the Sino-U.S. bilateral imports and exports were $69.39 billion and $232.68 billion, respectively, and the U.S. trade deficit was
$163.29 billion. According to Table 2.8, the trade exports whose prop- erty rights belonged to the U.S. amounted to approximately $72.07 billion. In iron, steel, petrochemical, and light industrial exports, the property rights belonging to U.S. companies accounted for a large proportion. From the total amount, in addition to the commodities worth $232.68 billion, around $72.07 billion of capitals also flowed from China to the U.S. If adjustment is made according to ownership affiliation, China’s trade surplus against the U.S. should be adjusted from $163.29 billion to $91.22 billion, which is an adjustment range of 44.14%. To sum up, China does have a surplus with the U.S., but the value is much lower than the figure calculated by the customs statistics.
As the processing steps in Fig. 2.2 shows, China’s surplus with the U.S. is preliminarily estimated according to China’s non-competitive input–output table in 2007 and the equity structure information of 43,911 foreign-invested enterprises. The latter states that in 2007, nearly 32.98% (i.e., one-third) of the property rights in China’s industrial manufacturing trade surplus did not belong to China. In the same year, the manufacturing trade surplus should be reduced from the original $443.41 billion to $297.13 billion. In terms of the Sino-U.S. trade, in 2007, Sino-U.S. bilateral imports and exports were $69.39 billion and $232.68 billion, respectively. After exclud- ing the part whose property rights belonged to the U.S., which is worth $72.073 billion, China’s trade surplus with the U.S. should be adjusted to $91.217 billion, that is, an adjustment range of 44.14%.
In other words, the property rights of 44% of the surplus in the
FromTradeSurplustotheDisputeovertheExchangeRate9inx6inb2268-ch02page56
TradeSurplustotheDisputeovertheExchangeRate
(million $).
Imports from the U.S.
Exports to the
U.S.
Original Sino- American
surplus
Property rights adjustment
proportion (%)
Share of the U.S.
capital in total exports
Exports after adjustment
Surplus after adjustment Mine selecting and
smelting
12805.2 2745.9 −10059.3 4.87 133.7 2612.2 −10193.0 Food, alcohol, and tobacco 27940.9 36866.7 8925.7 5.66 2085.4 34781.3 6840.3 Light industry 31432.3 420412.5 388980.3 2.61 10952.7 409459.8 378027.5 Petrochemical industry 130945.4 176812.9 45867.5 6.30 11139.5 165673.4 34728.0 Building materials 4940.5 31887.4 26946.9 3.62 1154.2 30733.2 25792.7 Special and common
machinery
17495.2 62596.3 45101.1 7.40 4629.2 57967.2 40472.0
Iron, steel, and metal rolling and processing
362817.4 1587730.4 1224913.1 2.63 41778.3 1545952.1 1183134.7
Energy 2.8 3097.1 3094.3 6.36 197.0 2900.1 2897.3
Total 588379.6 2322149.2 1733769.5 39.45 72070.11 2250079.1 1661699.5
Source: The import trade data are taken from WITS-COMTRADE Database, and the proportion of property right adjustment is estimated according to the Chinese Entrepreneur Directory.
On Trade Surplus from Property Rights 57
Competitive IO table
Non-Competitive IO table
Processing Trade Non-processing trade
Labor Payment Non-labor Payment Domestic capital Foreign capital
US capital Japan capital UK capital …… Germany capital Figure 2.2: Foreign capital property rights processing steps in processing trade export data.
Sino-U.S. trade imbalance belonged to U.S. companies. Therefore, failing to consider the property rights affiliation but including this part into China’s trade surplus according to the regional concept seriously exaggerates the degree of China’s trade imbalance.
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Chapter 3
Interpreting the Economic Scale of China
• The GDP estimate directly affects the judgment of the degree of foreign trade imbalance. The traditional Atlas method grossly underestimates the GDP of China. Purchasing power parity (PPP) should be used uniformly when performing transverse comparison with other countries.
• On average, the proportion of the service industry in the GDP is 73.4% in high-income countries, 62.4% in middle- and high-income countries, 55.2% in middle- and low-income countries, and 47.1%
in low-income countries. According to the official figures, in China, the proportion of the service industry in the GDP was only 48.2%
in 2014, which is close to the average value for low-income countries in the world. Evidently, the statistics of the service industry in China is seriously underestimated.
• The per capita GDP of China is equivalent to the level of lower middle-income countries according to the Atlas method and to the level of upper middle-income countries according to the PPP.
Therefore, the reasonable range of the proportion of the tertiary industry in China should be between 55.2% and 62.4%.
• If the proportion of the service industry in China is adjusted to 52.8% (regression result), 55.2% (the average level for the service industry in lower middle-income countries), or 62.4% (the average level of the service industry in upper middle-income countries), its GDP should be adjusted to $9.9 trillion, $10.4 trillion, or $12.4 trillion, respectively. The economic scale of China may be signifi- cantly greater than the official data.
59
60 From Trade Surplus to the Dispute over the Exchange Rate
• The processing depth coefficient is derived to observe the GDP from the perspective of the overall national power. If China shares the same processing depth coefficient as that of Zimbabwe, the GDP obtained according to the Atlas method should be increased by 27%. If its processing depth coefficient is close to that of the Philippines, the GDP scale of China should be approximate to the estimate according to the PPP. If the figure is the same as those of Mexico and Brazil, the GDP of China should be similar to the value after adjusting the proportion of the service industry. The processing depth proves that the GDP scale of China is grossly underestimated from another perspective, resulting in the overes- timation of the foreign trade dependence and trade surplus of the country.