Considerations like volume, cost, value added and currency fluctuations influence the outcome.
The reality, as the following article explains, is that China is - probably - the world's largest exporter. But - and isn't there always one? - it's not as dominant as common wisdom might indicate.
There is also a larger question, which is: does this sort of statistic even matter in a technologically driven post industrial economy?
Much of the value in this economy can not be measured in tonnage or deadweight, but in pixels and influence. The economy is getting lighter in that regard so while exports remain a source of considerable value, it is how that value is added and the margins those intangibles offer that should be of the greatest concern for the future. JL
Peter Cai reports in the Business Spectator:
Once we strip off the non-Chinese component or high value added component of the country’s export figures, the world’s factory looks a lot less formidable. It’s only marginally larger than the US, which exports a lot less than China in terms of volume.
Is China the world’s largest exporter? The answer to this question should be a simple and resounding ‘yes’. The country has been the world’s largest exporter since 2009. China is not only the world’s largest exporter, it is the world’s largest trading nation as measured by the sum of exports and imports, having replaced the United States for the first time in 2014.
You may even wonder why I would bother to ask such a basic question. China is without dispute the world’s largest export juggernaut, 40 per cent larger than the United States. But, is China still the world’s champion if we look at these export figures from a trade in value added perspective?
Let me illustrate this question with an example. China makes a lot of iPhones for Apple. Lets say the country exports $5 billion worth of iPhones to the US. Trade statistics will simply record it as $5 billion worth of exports to America. But iPhones are made up of components from all over the world, including Japanese and South Korean supplied parts, not to mention American design and branding.
So it is more accurate to say Chinese workers assemble iPhones rather than make them. Consequently, Chinese factories that make iPhones (Which are in fact, owned by the Taiwanese) are really at the lower end of food chain. Researchers from the Chinese Academy of Social Sciences, a government-owned think tank, estimate China only makes about $57 out of every $100 worth of iPhones exported.
So if China exports $10 billion worth of iPhones a year to the US, the Chinese component is only $5.7 billion. What this example illustrates is the Achilles Heel of the Chinese manufacturing industry. The sector has grown exponentially over the last three decades on the back of foreign demand, investment and technology transfers.
However, the industry still relies on developed economies such as the US, Germany and Japan for the latest IP as well as capital goods. For example, China produces 38 percent of machinery in the world but it still has to import a lot of digitally controlled machinery tools from abroad. Though the country produces more than 50 per cent of the world’s steel, it still has to import high grade steel cables from abroad.
Leaving iPhones aside, for every $100 worth of goods exported by China, the domestic component or Chinese value added part is only $67, according to OECD data. So in the year China overtook Germany to become the largest exporter in the world, the country exported $1.4 trillion of goods with the Chinese value added share a bit more than $800 billion.
Xu Qiyuan, a researcher from the Chinese Academy of Social Sciences puts this 67 per cent value added figure into a global perspective. For example, for every $100 worth of goods exported by the US, the value added component is $87. So it is clear that American exporters sit at the top end of supply chain and their export businesses are a lot more profitable than their Chinese competitors.
So when we look at the Chinese export industry from a value-added perspective, we can see it was not the largest exporter in 2009. According to Xu’s calculation, China only overtook the US in 2012 -- even though it was only by a small margin of $9.1 billion. In 2013, China’s exports were $88 billion larger than the US but the volume was only 40 per cent larger than the US.
So once we strip off the non-Chinese component or high value added component of the country’s export figures, the world’s factory looks a lot less formidable. It’s only marginally larger than the US, which exports a lot less than China in terms of volume.
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