I was reading that China was buying all the US bonds, and has over a trillion dollars. Making it (the biggest?) "investor" in the US. It has a lot of reasons (a trillion of them) to want the US to do good.
I don't know if the US is concerned about how many resources China has in bonds - making it at least a voice to be heard when talking about economic reform.
Even though some people realize what's going on and "the money goes to the right place," I think our country is in danger of making some serious policy mistakes if we are basing policy on statistics that are very inaccurate. The numbers also contribute to the growing opinion that the U.S. is on the decline, economically, while other countries like China and India are growing. If we could better document how much innovation such as the iPhone actually contributes to our economy and our trade stats, it could stimulate much more such innovation.
Investors probably have too many other data points to be misled by trade statistics. But the political importance of the US-China trade balance should not be understated. The emergence of China on the world stage is probably the major story of this century, and its relationship with the US is central to how that story unfolds. If US policy is guided by bad numbers that suggest China is stronger in trade than it really is (especially likely in the absence of market signals from a convertible renminbi), the US stance may become more confrontational than it needs to be. If the relationship breaks down into trade and other squabbles, there may well be economic consequences for countries/companies beyond the China-US pair.
Thank you for your post, it cleared that up for me. Do you think third countries could be influenced into thinking that since the 'trade deficit' is so big (in favor of either country), they will invest in that... my question is, beyond diplomacy, what's the impact?
Yes, "the money is still going to the right place" but a lot of diplomatic effort is spent trying to "fix" our trade deficit with China when in reality we don't know the true size of it. The US overall trade deficit is large and unsustainable, but it is important for us to know which countries ultimately receive those trade dollars so that we lobby for the right kinds of adjustments with the right nations. We have numerous areas of conflict and cooperation to sort through with China, and they would all be made a little easier to address if trade turns out to be less of a concern than everyone now thinks.
I also get the point but how does that impact the real World? -- are the wrong policies being implemented because of that unfair distribution? the money is still going to the right place.
We raised this point a few years ago looking at the iPod (http://pcic.merage.uci.edu/papers/2008/WhoCapturesValue.pdf). The WTO has been working on the issue by developing a World Input Output Database (search on WTO and WIOD), but it's actually very tricky to make all the trade numbers balance at the level this would require. And be careful what you wish for; the new system might impose extra documentation burdens on companies.
I am quite surprised with this analysis when the iphone is simply an import item from China into the US. In fact, if this is the way adopted for calculating trade deficits, many of the products nowadays follow the same suite.
Apple is making its money and i don't know they are complaining.
China is making their money too and i'm sure they are not complaining.
isn't this "war" as it is called just the concern of analysts and concernt individuals not really the stake holders?
I don't know how much it saves apple to assemble the iphone fully in china, while importing every single component.
Why can't those components be imported into the US? I know they say its cheaper to do all that in china, but really, how much cheaper is it, and for how long?
So if the point is simply profit, then i don't see any war going on here, just sharing the profit between US and CHINA
This is very interesting and disturbing at the same time. This is just another example of how statistics can be distorted. You would think there would be a better way to record the true numbers so they reflect where the dollars should rightfully be allocated. If the system doesn't change in the future, the foreign trade market could be skewed even more than it already is.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
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You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
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