Q. How much overblown are the statistics with China's export value?

A. Processing trade constitutes a crucial component part of China's external trade, making up more than 50 percent. In its processing trade, however, China only earned a very tiny proportion of the fees from the processing business. But at the arrival of these products in the U.S. and other overseas markets, they are reckoned for their export value instead of the added value, so China's actual export volume is over-exaggerated. In other words, what actual interests China acquires is not the gross export value. If the surplus from the processing trade is deducted, its trade surplus with overseas will be cut anywhere from 80 percent to 90 percent.

Q. What effect does the direct investment of US firms in China have on the statistical figures of trade surplus?

A. The investment of the U.S. in China has brought changes to the trade patterns and flows. The very fact that the U.S. exports much less to China than what it imports from the country does not show fully the actual interest the U.S. has attained. The more and more products it used to export to China have now shifted to be made in the country. This has not only raised the market share of the US firms in China but has helped reduce the direct exports from the U.S., and this change has not been shown eloquently in trade statistics of both sides. Preliminary statistics indicate that the sales volume of commodities made by the US-funded firms in China reached more than 75 billion US dollars in 2004 alone, and the statistics from the Chinese side showed the US trade deficit that year was 80.2 billion US dollars and, if the sales volume of 75 billion dollars was written off, then the real trade deficit would be only 5 billion dollars. Moreover, some of these products would be sold or re-exported in the U.S. though they are produced by US firms in China.

Q. How do you look at the Sino-US trade surplus?

A. Surplus is not an issue worth being quibbled over, and I hope that the issue will be looked upon with a sober mind.

Trade surplus is merely a statistical parameter, and trade deficit cannot be simply termed as a loss, or trade surplus regarded simply as a profit. From the economics point of view, it would be meaningless if the sole attention is given to a single topic of bilateral trade deficit.

New and high technology has contributed tremendlously to the growth of US economy in recent years. The U.S. has eliminated some of the labor-intensified manufacturing sectors of low added value, and it has worked hard and diligently to expand its service trade. On the contrary, China has, in its process of globalization, taken up in a massive way the general manufacturing industry, which has been transferred from globalization and it makes each other's deficit with the United States in the division of labor. Meanwhile, it is universally acknowledged that the China-made products are cheap and in good quality to the welcome of American consumers. At the time when the overall US trade deficit is on rise, it is not difficult to understand that its China trade deficit grows accordingly.

1

2

3

(For more biz stories, please visit Industry Updates)