Old paradigm, Ed.
It seems all the noise about China has been grossly oversold... And from someone who ought to really know better! Richard
Here?s something that should revise a lot of clichés, though it probably won?t: less than 3% of U.S. consumption expenditures are on goods made in China. Almost 90% are made in the USA. Of course, the domestic total is boosted by services?but even durable goods are 12% China, 67% U.S. And less than half the value of Chinese imports go to China?55% of the money spent on ?Chinese? goods represent processing and other services (like distribution and retailing) provided in the U.S.
This info comes from a new paper by Galina Hale and Bart Hobijn of the San Francisco Fed. Their point was to show that Chinese inflation has minimal influence on U.S. price levels, which is persuasive. But it?s also an antidote to the widespread belief that the U.S. is hollowed out and all the action is in China. We?ve got problems, yes, but we?ve also got resources?resources we can do a lot better with than we are now.
For all the ballyhoo about how Chinese products have infiltrated our shelves, it turns out that only 1.2% of American spending actually ends up in their coffers. How is this?
Well, as this report from the Federal Reserve Bank of San Francisco reveals, for starters, 67% of American spending is on services ? and 96% of the services we buy are totally made in the USA. So that takes out a big chunk of spending right there. On top of that, only 10% of American spending is on durable goods. And USA still dominates that category, clocking in at 66%, while China is only 12%.
It gets even better. 11.5% of what US shoppers spend goes towards goods and services produced overseas, but 36% of that goes towards US companies and workers in the form of paying for transportation, wholesale, and retail activities.
In the final analysis, only 2.7% of American spending is on "Made in China" goods, and only 1.2% of the American expenditure is on the true cost of the goods. So for every dollar spent on a plastic "Made in China" "Robert-Cop" doll, 55 cents ends up in the pockets of American companies.
Commentator Doug Henwood says the study should serve as, "an antidote to the widespread belief that the U.S. is hollowed out and all the action is in China."
The U.S. Content of "Made in China" [Federal Reserve Bank of San Francisco]
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