James Marshall writes from Washington: So, the Chinese New Year has arrived and as a present to the people the Chinese government has released a set of statistics showing that China is now the leading trading nation in the world. According to Beijing, in 2012 exports and imports amounted to a staggering $3.87 trillion. The United States trailed with $3.82 trillion.
Does this mean the beginning of the end for Uncle Sam? Not a bit of it. As someone once said, there are lies, damned lies and there are statistics. You can massage numbers to produce practically any result you wish.
So do the latest Chinese stats lie? Of course they do. First of all, they don’t include services where America outstrips the Middle Kingdom by a wide margin. Would you choose a Chinese bank to do an international deal over an American? No need to answer that question I suppose.
Then there is the problem of deciding exactly what are Chinese ‘exports’. Take, for instance, what an expert at the Cato Institute said: ‘The back of your Apple device reads: ‘’Designed by Apple in California. Assembled in China.’’’ The iPod costs $150 to produce but only $5 of that consists of Chinese inputs. However, the whole $150 is added to Chinese exports’.
So what proportion of Chinese exports are in reality foreign intermediate goods? A quarter? That puts the sensational news that China is the no.1 trading nation into perspective.
There is another interesting side to these Chinese numbers. Exporting and importing is used as a way to illicitly move money out of China. As far as exports are concerned, they can be understated. The difference then goes into a foreign bank account. Importing follows the same pattern. Get some official to overstate your imports and you can then send more money abroad. Another tactic is to pay a foreign company large sums for marketing and public relations. The main shareholder in the company is the Chinese company, of course.
The United States, Canada and Australia grant permanent residence to the Chinese provided that they bring assets of a certain amount into the country. Eventually a foreign passport can be acquired. So you have a game going on. Foreign countries wish to attract Chinese capital and Chinese want to get the money out of the Middle Kingdom. Hundreds of billions of dollars leave China illegally every year. How much of this is camouflaged by false reporting of exports and imports and paying for services? A lot, I suppose.
So why do so many Chinese want to move their riches abroad? Why do they want their kids educated in North America, Australia and England? There are two possible reasons. One is that much or all of the money has been acquired by unorthodox methods. In simple language, embezzled at the expense of the state. This hot money has to go abroad as quickly as possible. The other reason may be that the rich think the glory days of Chinese economic growth are coming to an end. Better to get out now before the place collapses. After all, China is ruled by the Communist Party. And communist parties do not exactly have a good record when it comes to staying in power.
So the next time you read about China surpassing Uncle Sam in commercial terms, think again. The numbers were massaged and the smart Chinese are leaving the country. Conclusion? America is still a safer bet than the Middle Kingdom.