Understanding the US-China Trade Relationship
Prepared for the US-China Business Council
by Oxford Economics
January 2017
Executive Summary
Today,
the US-China trade relationship actually supports roughly 2.6 million
jobs in the United States across a range of industries, including
jobs that Chinese companies have created in America. And as the Chinese
middle class continues its rapid expansion over the next decade (the
number of Chinese middle-class consumers will exceed the entire
population of the United States by 2026), US companies
face significant opportunities to tap into a new and lucrative customer
base that can further boost employment and economic growth. Economic
data show that nations trading closely with China outperform nations
with less integrated trade ties, and we expect
this trend to continue.
Examples of the benefits to the US economy from trade with China include:
·
China
purchased $165 billion in goods and services from the United States in
2015, representing 7.3 percent of all US exports and about 1 percent of
total
US economic output.
·
Although
some US manufacturing jobs have been lost because of the trade deficit,
US firms sell high-value products to China, including cars and trucks,
construction equipment, and semiconductors, which support jobs. US
firms also export business and financial services, totaling $6.7 billion
in 2014 and $7.1 billion in 2015. By 2030, we expect US exports to
China to rise to more than $520 billion.
·
As
China has become an integral part of the global manufacturing supply
chain, much of its exports are comprised of foreign-produced components
delivered
for final assembly in China. If the value of these imported components
is subtracted from China’s exports, the US trade deficit with China is
reduced by half, to about 1 percent of GDP—about the same as the US
trade deficit with the European Union.
·
America’s
11th-largest export market in 2000, China has grown to become the
third-largest destination for American goods and services. US exports to
China
directly and indirectly supported 1.8 million new jobs and $165 billion
in GDP in 2015. When the economic benefits generated from US investment
in China and Chinese investment in the US are combined, the total
amounts to 2.6 million US jobs and about $216
billion of GDP.
·
China
is expected to continue to be one of the fastest growing major
economies, creating growth opportunities for American companies—
provided China proceeds
with economic reforms that will remove lingering market access barriers
in many sectors.
·
Chinese
manufacturing also lowered prices in the United States for consumer
goods, dampening inflation and putting more money in American wallets.
At an
aggregate level, US consumer prices are 1 percent - 1.5 percent lower
because of cheaper Chinese imports. The typical US household earned
about $56,500 in 2015; trade with China therefore saved these families
up to $850 that year.
·
Since
2003, productivity growth in US manufacturing outpaced most advanced
economies. Oxford Economics calculates that US manufacturing
productivity increased
by 40 percent from 2003 to 2016, or 2.5 percent annually, compared with
23 percent in Germany.2 Meanwhile, rapidly rising factory wages and a
rising currency make Chinese workers relatively less cost-competitive
than their American counterparts. US factories
are still 90 percent more productive than Chinese manufacturers. These
trends may lead to some “reshoring” or retention of manufacturing jobs
in the United States.
Full text at https://www.uschina.org/
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