Chapter 2. On Trade Surplus from Property Rights 35
2.3 Shares of the Domestic and Foreign Capitals in Non-labor Compensation in Processing Trade
In fact, non-labor compensation should be distributed according to the share structure of multinational companies. Therefore, distin- guishing between labor and non-labor compensation in exports of processing trade in the non-competitive input–output table is nec- essary. Afterward, non-labor compensation should be distributed according to the percentage of shares of different countries.
First, the proportion of labor compensation (αi, αi) in the total value-added is calculated, and the rest is counted as the share of non-labor compensation in value appreciation (βi,βi). According to the structure in Table 2.1, the proportions of labor and non-labor compensation in the total value-added can be calculated. That is, the proportion of labor compensation in processing trade export is αi =
Ii
Ii+IIi+IIIi+IVi(i= 1ã ã ã8); the proportion of non-labor compensation in processing trade export is βi = 1−αi; the proportions of labor and non-labor compensation in non-processing trade export areαi =
Vi
VIi+VIi+VIIi+VIIIi(i= 1ã ã ã8) and βi = 1−αi, respectively.
FromTradeSurplustotheDisputeovertheExchangeRate9inx6inb2268-ch02page43
OnTradeSurplusfromPropertyRights43
input input input
Fixed Increase
1. . . 8 1. . . 8 1. . . 8 Consumption capital in stock Export Domestic need
input
1. . . 8 — — — — — — —
Processing export input
1. . . 8 —— —— —— — — — X
Non-processing export and other input
1. . . 8 — — — — — — XI
Intermediate input of imports
— — — — — — — —
Total of intermediate input
— — — — — — — —
Total
value-added
Labor
compensation
— I V — — — —
Net product tax — II VI — — — —
Fixed-assets depreciation
— III VII — — — —
Operating surplus
— IV VIII — — — —
Total input — — — — — — — —
Note: “—” indicates that the value is 0 in this quadrant. For example, the values in consumption and fixed asset matrixes in the final use of processing export are 0.
44 From Trade Surplus to the Dispute over the Exchange Rate
Table 2.3: Labor and non-labor compensation in processing and non-process- ing trade in different manufacturing industries (100 million yuan).
Processing trade export Non-processing trade export
Labor Non-labor Labor Non-labor
compensation compensation compensation compensation 1 Mine selecting
and smelting
65.78 74.77 67.26 102.16 2 Food, alcohol,
and tobacco
202.13 335.44 483.79 977.81
3 Light industry 2539.89 3219.50 5865.07 8233.65 4 Petrochemical
industry
1009.51 2106.27 1604.06 3742.80 5 Building
materials
77.22 123.35 476.33 818.05 6 Special and
common machinery
141.19 462.18 1213.96 3455.12
7 Iron, steel, and metal rolling and processing
12235.10 21657.14 5640.77 10248.72
8 Energy 6.82 19.94 123.90 321.78
Total 16277.64 27998.59 15475.14 27900.09
China’s foreign-invested enterprises have three basic forms, namely, entirely foreign-owned enterprise, Sino-foreign joint venture, and Sino-foreign cooperative joint venture, in which the proportion of the foreign investment is different. The share data of several enter- prises are very clear; however, few enterprises do not report the spe- cific share distribution data. Therefore, in the absence of the detailed share structure data, the foreign investment is roughly estimated to account for 50% of the shares in the Sino-foreign joint ventures and 50% of shares in the Sino-foreign cooperative joint ventures; 100% of the shares belong to the foreign investment in entirely foreign-owned enterprises.3 According to the equity data of 43,911 foreign-invested
3If possible, foreign-related enterprises can be required to report the equity structure according to the unified model, greatly increasing the accuracy of data.
On Trade Surplus from Property Rights 45
enterprises in 2007, a total of 505 departments were reduced to eight. fi represents the average proportion of foreign capital in eight departments.
fi=
0.237 0.412 0.329 0.359 0.308 0.238 0.416 0.189
In accordance with the calculation formula of foreign capital in non-labor compensation, that is, Xi×βi×fi, the shares of the prop- erty rights not belonging to China in processing trade export can be estimated. The results are shown in Table 2.4.
In 2007, China’s manufacturing imports amounted to $712.86 bil- lion, and its manufacturing exports amounted to $1.15627 trillion.
Excluding $146.28 billion of exports whose property rights belonged to foreign investment, the amount of China’s manufacturing trade surplus should be reduced from the original $443.41 billion to $297.13 billion, which is a decrease of 32.98%. In other words, nearly one-third
Table 2.4: Shares of domestic and foreign investments in processing trade export in different manufacturing departments (100 million yuan).
Domestic capital Foreign capital 1 Mine selecting and smelting 57.04 17.73 2 Food, alcohol, and tobacco 197.38 138.07
3 Light industry 2160.29 1059.21
4 Petrochemical industry 1350.84 755.43
5 Building materials 85.38 37.98
6 Special and common machinery 352.20 109.97 7 Iron, steel, and metal 12656.01 9001.13
rolling and processing
8 Energy 16.16 3.78
Total 16875.30 11123.29
In $ 1462.82
46 From Trade Surplus to the Dispute over the Exchange Rate
Table 2.5: Imports and Exports of China’s major trade partners in 2007 (million $).
Export Import Trade surplus The U.S. 232676.6 69390.6 163285.9 The Netherlands 41417.8 4924.6 36493.3
The UK 31656.3 7775.5 23880.7
Spain 16528.5 4429.9 12098.5
Italy 21169.6 10210.8 10958.8
Russia 28466.2 19688.6 8777.6
Canada 19355.7 10979.1 8376.6
Belgium 12679.4 4973.1 7706.2
France 20327.4 13341.1 6986.3
Germany 48714.3 45382.9 3331.4 New Zealand 2160.2 1537.8 622.4
Sweden 4548.9 4141.8 407.0
Austria 1552.0 2452.3 −900.3
Switzerland 3600.5 5844.0 −2243.5 Australia 17989.7 25840.3 −7850.7 Japan 102008.6 133942.4 −31933.8 South Korea 56098.9 103752 −47653.1 Source:China Statistical Yearbook, 2008, “Volume of Imports and Exports by Countries and Regions (Customs Statistics).”
of China’s manufacturing trade surplus did not belong to Chinese enterprises.4