Peter Navarro and Greg Autry
Any tourist standing on Shanghai's waterfront and gazing across at the garish Pudong skyline sees the visible manifestation of American wealth moving to China and every businessperson on the streets of Shenzhen knows that the manufacturing export business built it.
Yet, a recent "economic letter" from the San Francisco Federal Reserve Board contends that America is spending only 1.9 percent of its dollars on Chinese goods. It has inspired headlines like: "'Made in China' Taking Over U.S.? Not By a Long Shot" from the Wall Street Journal. How can we reconcile what we see on Wal-Mart's shelves with what these experts and media pundits tell us?
As Benjamin Disraeli supposedly remarked, "There are lies, damned lies and statistics" and the arcane art of econometrics makes it easy for academics and pundits to tell the public that black is really white with a straight face. Let's peel back just the surface of the onion that the FRB has offered us:
Firstly, the paper, titled "The U.S. Content of 'Made in China'" is based on Personal Consumption Expenditures (PCE), which include everything from existing housing to used cars and nursing home stays. It just isn't germane to discussions of trade balances and creating national wealth.
Obviously, China doesn't play in these generally non-tradable categories, which comprise the largest portion of consumer spending. Leasing cars and renting houses do move a lot of PCE dollars around, but they create no new net wealth for America and provide relatively few jobs. Making the tools to build new homes and making the parts to build new cars are what create wealth and jobs; two things that are increasingly "Made in China."
Read more at The Huffington Post (if you enjoy anti-China rants)
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