The Truth About Chinese-U.S. Trade

With all the hoopla in the media about all things Chinese—exports, Chinese investors in the United States, the U.S. trade deficit with China, and so on—we thought this myth-exploding article was worth the read. It’s aimed at investors, but relevant to anyone interested in the U.S. economy and how our relationship with China really works. For example, the U.S.’s foreign direct investment (FDI) in China so far this decade is only a third of what we’ve put into Ireland and Germany.

The U.S. also enjoys far greater access to the Chinese market than the other way around:

When it comes to foreign direct investment — or the corporate presence of the U.S. in China versus China’s presence in the U.S. — the U.S. enjoys an overwhelming advantage over the mainland. In 2006, for instance, U.S. foreign investment in China on a historic cost basis totaled $22.2 billion, a figure well in excess of China’s investment stakes in the U.S. The latter totaled just $600 million last year — a fraction (2.7%) of U.S. investment in China.

Another interesting fact: the oft-quoted massive trade deficit the U.S. suffers doesn’t take into account foreign affiliate sales—U.S. companies selling products locally within China. “At the end of the day, China does sell more to the United States, but not by the lopsided margin some might suppose.”

Read all ten facts about Chinese-U.S. trade at Kiplinger.

“The Top 10 Things Every Investor Should Know About U.S.-China Relations” [Kiplinger]
(Photo: Getty)

Comments

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  1. nutrigm says:

    Yeah we’re opening Mccy D’s to feed the fat chinese investors who pay their workers $1 a month to churnout sub quality Gillette Mach 3 blades and then destroying the market for another U.S. company. Oh ofcourse, they get paid from a U.S. customer via a U.S. Bank operating in Beijing.

    Good deal.. yeah right!

  2. kimsama says:

    There are some interesting papers on the Chinese economy and FDI at Brookings (yeah, sorry, I was researching earlier, so I’m annoying). Pretty neat stuff when you read into it in depth.

  3. rbb says:

    Why should the Chinese pay for our goods/technology when they can just steal/reverse engineer it…

  4. lincolnparadox says:

    It’s not the trade deficient that worries me. It’s the amount of US foreign debt held by Chinese investors. Currently, that’s just shy of $400 billion (which is $100 bln less than Japan, btw), but you couple that with their investment in the US Stock Market and that’s leverage. Granted, it’s also security. When someone is making you money with their stock market and owes you $400 bln, you try to remain friendly with them.

    [www.treas.gov]

  5. Me - now with more humidity says:

    That’s trade “deficit,” sport.

  6. bustit22 says:

    @lincolnparadox:
    The Chinese are holding that debt because US gov’t debt is dam near guarenteed. Unlike what the paranoid conspiracy theorists say, the Chinese aren’t going to dump US treasuries.

  7. LoLoAGoGo says:

    US FDI would be higher in China if the Chinese government reduced their restrictions to investing (I believe US companies cannot own more than 49% of a subsidiary in China… but don’t quote me on it). Isn’t likely, but we can dream. Germany and Ireland have very few restrictions on ownership and investment in comparison. Don’t forget, the U.S. has a trade surplus in the services market, where most of our expertise, money, and potential growth lies anyway. We are at an absolute advantage in the services market as well, no one can come close.

  8. jeff303 says:

    @bustit22: yep, it is guaranteed to become more and more worthless with each passing week all right

  9. KJones says:

    What makes me laugh the most is the (sorry to the website owner) pussiness of US lawmakers who whine about “Chinese companies dumping cheap product on the US market”.

    Those Chinese companies are contract bidders of US companies who wanted cheap product. And of course, those whiny lawmakers are taking money from the lobbyists working for companies which ship jobs and manufacturing overseas to the lowest bidder.

    Those pricks are too busy pointing their fingers at China to point it at themselves in the mirror. Sure, Chinese companies did it, but US companies and their greed caused it to happen.

  10. mattbrown says:

    propaganda!