Inflated view of China's Growth

20101206-chinas-export-machine-caps

China's exports are less dominant than we initially perceived.  That is because "many of China's export shipments include imported goods that are reassembled" before being finally exported.  That creates an inflated view of the number of exports that China actually has and skews our view of China's growth.Researchers developed a new metric called "domestic value added exports" which are total exports minus all imports used to produce goods that are subsequently exported.

Domestic Value Added Exports Equation DVAE = [total exports] - [imports used to produce goods that are subsequently exported].

DVAE

In 2008, China's total exports were 33% of their GDP.  DVAE was 19% of their GDP, meaning that only 14% of their GDP was from pure exports which entirely originated from China.

This is more reason to use the term GNI (Gross National Income) instead of Gross National Product, because much of what is produced is not an actual product but a service or combination of internationally sourced products.

This article supports my view that the world is: 1. over emphasizing China's growth and power 2. too reliant on physical products -we are not measuring the output of these products (impact on people's lives or the environment) but we also are not properly measuring the input into these products. 3. needs new methods of identifying ways to measure production and income (on both a level for nations and individuals).

quotes via HBR HBR article - http://web.hbr.org/email/archive/dailystat.php?date=120610 Original study A truer picture of China's export machine by McKinsey Quarterly -http://www.mckinseyquarterly.com/Strategy/Globalization/A_truer_picture_of_Chinas_export_machine_2676?gp=1

Notes taken on a mobile device. Pardon any auto-corrections or incorrection.