China 2015 Trade Surplus Reaches $594.5 Billions

[somsak]

But you are very wrong my friend.

1) Fundamental mistake. Note that foreign direct investments (FDI) can get their profits out of the country REGARDLESS of trade balance, be it $600 billion surplus or $6 trillion of deficit.

2) About getting profits, Chinese outbound direct investments (ODI) on foreign soil can ALSO get profits back into the country. Do you know the size of China's ODI?

3) If you insist on "foreign" companies, let's check 2015 FDI Jan-Nov actual data top 5 sources: 78.175% came from Hong Kong, 5.479% from Singapore, 3.653% from Taiwan, 3.457% from South Korea, 2.842% from Japan, the rest are just insignificant. What's so "foreign"?

4) If you insist on FDI's contribution to trade surplus, let's check FDI by sector, 61% of FDI go into services sector. How services sector generate merchandise exports, hence contribute to trade surplus?


China ODI rises - The Himalayan Times
Commerce ministry: Increase in FDI, ODI puts economy on target
China's outbound investment expected to exceed FDI in 2015 - China.org.cn
2015年1-11月全国吸收外商直接投资情况中华人民共和国商务部网站 ​

In order to calculate the effect you've mentioned. One should consider account balance. China still has a huge account balance Surplus.

"Majority of trade surplus" doesn't come from foreign companies' activities. Most foreign companies operating in China had local counterparts. Foreign company provides the specs and design and Chinese company produces and sells it to the foreign company. It's how this outsourced manufacturing business works anyway.

Do you think apple produces iPhone in an "Apple factory" in China? No. Apple is produced by Foxconn which is owned by a Taiwanese businessman, and it's headquarters is in China. Which makes it a Chinese/Taiwanese company. Foxconn produces iPhones. Than sells it to Apple, and Apple sells it to consumer directly or sells it bulk to nerwork providers.

Made in China model works like this. Now as the value addition increases, China not only makes the high end manufacturing for Apple but also penetrates Apple's supply Chain. Meaning China makes more money from iPhone Each year. Because instead of buying a glass from a Japanese company in the production process, a Chinese company would provide the glass which creates more strategic leverage, more business oportunity and more economic activity.

Besides there are tons of other Chinese companies which are selling their own products. Have you Ever heard a company called Huawei, lenovo, xiomi or do you have any idea about the Export performance of Chinese companies in businesses like chemical production or mining? Chinese banks sells credits to European businesses do you know that? Hell ICBC bought a Turkish bank this Year. Do you know that China sells electricty to it's neighbours?

Economy and trade is something that is extremely complicated to model with a simple Logic like you provided.

My understanding is that an iphone assambled by foxconn will be written as China's trade surplus 100% even if foxconn only get 5%. Then foxconn need to buy semiconductors. suppose all the semiconductor happened to be American company in China, and suppose Apple has a subsidary company in China then China get full trade surplus of an iphone but the real money go to foxconn only 5%, 95% goes to apple subsidary, and American semiconductor companies. Then these foreign companies move these 94%(=95 - 1%chinese labour cost) profit out of China through another book called account balance. Hence trade surplus is not real money China get.
I may be wrong.

But you are very wrong my friend.

1) Fundamental mistake. Note that foreign direct investments (FDI) can get their profits out of the country REGARDLESS of trade balance, be it $600 billion surplus or $6 trillion of deficit.

2) About getting profits, Chinese outbound direct investments (ODI) on foreign soil can ALSO get profits back into the country. Do you know the size of China's ODI?

3) If you insist on "foreign" companies, let's check 2015 FDI Jan-Nov actual data top 5 sources: 78.175% came from Hong Kong, 5.479% from Singapore, 3.653% from Taiwan, 3.457% from South Korea, 2.842% from Japan, the rest are just insignificant. What's so "foreign"?

4) If you insist on FDI's contribution to trade surplus, let's check FDI by sector, 31.9% goes into manufacturing, 60.9% of FDI go into services sector, 8.2% into others. How services sector and others generate merchandise exports, hence contribute to trade surplus?


China ODI rises - The Himalayan Times
Commerce ministry: Increase in FDI, ODI puts economy on target
China's outbound investment expected to exceed FDI in 2015 - China.org.cn
2015年1-11月全国吸收外商直接投资情况中华人民共和国商务部网站
2015年1-8月各行业利用外商直接投资情况​

Hongkong can be foreign company in disguise.

 

[mirage]

The Chinese government is in charge.

The outflow of money is from Chinese owners. They are diversifying their assets. This is easy to stop. If the Chinese government wants to forcefully clamp down on the outflow, it would dry up quickly.

China could also easily reverse the outflow by increasing the interest rate.

The actual outflow has only been net negative $200 billion to $300 billion. China's foreign exchange reserve topped out at $3.7 trillion. The current foreign exchange reserve is $3.5 trillion. Also, China has another $50 billion in gold reserves that are not counted (see The Economist citation in another thread).

By October 2016, China's Yuan will be added to the IMF SDR basket. This means China's currency is officially legal tender for foreign business transactions. Also, China's inclusion in the IMF SDR is expected to bring an inflow of $1 trillion into China.

In conclusion, China doesn't have a foreign exchange problem. The flows will reverse once the Yuan starts appreciating, which is up to the Chinese government. The Chinese government caused the outflow by moving the soft peg from 6.2 to 6.5 Yuans per US dollar. If the Chinese government moved the soft peg back to 6.2 Yuans per US dollar, hundreds of billions of dollars would flow back in. This means the Chinese government decides how much foreign exchange reserves that it wants to keep.

how as exports are falling like anything !

Greater China is not one political entity. Chinese Government has no control over the financial assets of Taiwan, or even Hong Kong. Also, dollars are by far the most used currency, and owning them gives a lot of financial heft in the world. RMB ain't even close, and is not going to come close for the next 20 years.

US became the largest economy in 1870s, but it took it around 80 years to establish dollar as the sole reserve currency.

China today ain't even bigger than US yet. If everything goes perfect, only then can China hope that it will overtake dollar in 30 years after becoming the largest economy.

let him justify himself by his imaginative theories jotted down from googling the internet ( or for matter baidu-ing reading too much xinhua news articles ) . just one more big devaluation of yuan is coming and that will tell the rest of the story . just need to wait few more days .

 

[Shotgunner51]

My understanding is that an iphone assambled by foxconn will be written as China's trade surplus 100% even if foxconn only get 5%. Then foxconn need to buy semiconductors. suppose all the semiconductor happened to be American company in China, and suppose Apple has a subsidary company in China then China get full trade surplus of an iphone but the real money go to foxconn only 5%, 95% goes to apple subsidary, and American semiconductor companies. Then these foreign companies move these 94%(=95 - 1%chinese labour cost) profit out of China through another book called account balance. Hence trade surplus is not real money China get.
I may be wrong.

You were wrong my friend, read again.

1. Overwhelmingly 78.175% of FDI in China Mainland came from Hong Kong, they focus on services, commercial real estate.
2. Second largest 5.479% from Singapore, they do services and real estates, including Suzhou Industrial Park, Tianjin Ecocity.
3. Then 3.653% from Taiwan, they are in electronics, including Foxconn as you have mentioned, and FMCG products targeting domestic market.
4. South Korea, 3.457%.
5. Japan, 2.842%.

• The rest are just insignificant.

Hongkong can be foreign company in disguise.

Any "foreign" FDI can be also Chinese "in disguise" aka round-trip investment. In fact any FDI to "Country A" from country B can actually be from country C "in disguise", same logic.

Talking about "disguise", the data tracks "ultimate" origins by taking out all intermediate holding vehicles setup in regions like BVI, Cayman Islands, Samoa, Mauritius and Barbados.

 

[nang2]

And it is in the year that had the first export reduction since 2009. Balance sheet looks fine but the reduction is worrisome.

 

[PaklovesTurkiye]

Now a days, Napoleon remarks about China comes to my mind.

“China is a sleeping giant. Let her sleep, for when she wakes she will move the world.”

How far sighted he was.....Congratulations China.........its very hard to progress at your pace.....May more success comes to you! Ameen.

You just don't have haters and enemies, you have your friends and brothers too.

 

[somsak]

You were wrong my friend, read again.

• Overwhelmingly 78.175% of FDI in China Mainland came from Hong Kong, they focus on services, commercial real estate.
• 2nd largest 5.479% from Singapore, they do services and real estates, including Suzhou Industrial Park, Tianjin Ecocity.
• 3rd place, 3.653% from Taiwan, they are in electronics, including Foxconn as you have mentioned, and FMCG products targeting domestic market.
• 4th place 3.457% from South Korea.
• 5th place 2.842% from Japan.
• The rest are just insignificant.

Any "foreign" FDI can be also Chinese "in disguise" aka round-trip investment. In fact any FDI to "Country A" from country B can actually be from country C "in disguise", same logic.

Talking about "disguise", the data tracks "ultimate" origins by taking out all intermediate holding vehicles setup in regions like BVI, Cayman Islands, Samoa, Mauritius and Barbados.

You know dude, your data is only help discredit my statement but still cannot destroy my ground. Why? Because income of FDI is not evenly distributed. Dude. One tiny FDI from Apple can generate trade surplus like large investment. You know 80- 20 distribution do you?
Pareto principle - Wikipedia, the free encyclopedia

 

[nang2]

My understanding is that an iphone assambled by foxconn will be written as China's trade surplus 100% even if foxconn only get 5%. Then foxconn need to buy semiconductors. suppose all the semiconductor happened to be American company in China, and suppose Apple has a subsidary company in China then China get full trade surplus of an iphone but the real money go to foxconn only 5%, 95% goes to apple subsidary, and American semiconductor companies. Then these foreign companies move these 94%(=95 - 1%chinese labour cost) profit out of China through another book called account balance. Hence trade surplus is not real money China get.
I may be wrong.


Hongkong can be foreign company in disguise.

Your understanding is based on bilateral trade balance, not global balance. Your example explains the distorted trade surplus number with US, but not with the globe. Selling iphone won't get 100% surplus since China has to import parts to assemble.

 

[qwerrty]

• Overwhelmingly 78.175% of FDI in China Mainland came from Hong Kong, they focus on services, commercial real estate.

HK doesn't have that much money to invest in china. lol. i've read some where that more than half of that 78.175% is actually from mainland china just making round trip to take advantage of low taxes and other special preferential treatments that china given to HK

 

[DoTell]

Almost all major western media is mute about this news. Only Bloomberg Business reported it reluctantly China Trade Surplus Swells as Exports Rise in Boost for Yuan - Bloomberg Business somewhere in a corner, definitely not on their front page.

What a contrast to just a few days ago when China crash headlines were everywhere! This is so weird, it's almost comical As if they are in a big conspiracy when it comes to reporting news from China. We Chinese are getting educations on their media's neutrality and objectivity every single day

 

[Shotgunner51]

You know dude, your data is only help discredit my statement but still cannot destroy my ground. Why? Because income of FDI is not evenly distributed.

I don't mean to destroy anything my friend. Just trying to tell you your statements are simply wrong, with factual numbers.

• By sources: FDI is overwhelmingly dominated by Hong Kong, then East Asian economies, rest are simply insignificant.
• By sector: Most FDI goes into services, domestic markets.

Conclusion: Except FDI from Taiwan on tech/electronics, vast majority of FDI has no role in China's gigantic manufacturing and exports sector.

One tiny FDI from Apple can generate trade surplus like large investment. You know 80- 20 distribution do you?
Pareto principle - Wikipedia, the free encyclopedia

Apple has magic?

1. Well firs of all, Apple can generate exports by simply placing a OEM/ODM purchase order. Not a single drop of FDI is necessary in the process. The big question is always: Why order from China?
   
2. Whatever FDI, if it's is "tiny", then it's just "tiny", Apple is no exception.
   
3. If the purchase order is big enough and lucrative, the factory will always put up big investment, again not a single drop of FDI is a must for Apple.
   
4. Exports is one thing, trade surplus is entirely another story. Say oil goes ballistic to $10000000/barrel, China turns deficit right away, does Apple want to claim "can generate deficit" if such situation arises?
5. What 80:20 rule gotta do with investing? Like any investments, some FDI profits, some tanks, just business nature.

 

[Lure]

My understanding is that an iphone assambled by foxconn will be written as China's trade surplus 100% even if foxconn only get 5%.

Please try to understand what I've said. Foxconn sells everything what it produces to Apple. Takes it money. And that money stays in China. Afterwards Apple sells that product and makes money with it. The money that Apple makes isn't written in China's trade surplus. The money that Foxconn makes is written in China's trade surplus. And since that money stays in China, there is nothing wrong about it.

Let me repeat this simple fact again. 100% of the money from the production of Apple products stays in China. Apple pays for what Foxconn produces. Buys the product. And sells it. What Apple sells is not written as China's trade surplus. What Foxconn sells is written as a trade surplus.

Then foxconn need to buy semiconductors. suppose all the semiconductor happened to be American company in China

Don't suppose it. Because it's not.

How & Where iPhone Is Made: Comparison Of Apple’s Manufacturing Process | CompareCamp.com

In iPhone 6, there was 349 companies from China providing parts for Apple, compared to 139 companies from Japan and 60 companies from US. Now of course not all those companies are owned by Chinese citizens. However the trend of Chinese companies owned by Chinese entrepreneurs providing parts for Apple is also emerging.

http://www.ft.com/intl/cms/s/0/d70fca52-2691-11e3-9dc0-00144feab7de.html#axzz3x91jO26S

The number of Chinese companies supplying Apple with components such as batteries has more than doubled from eight in 2011 to 16 this year, according to Apple’s published lists of suppliers and research from the brokerage CLSA.

Apple has a subsidary company

The phone you've bought is not sold to you by a subsidary in China. It's sold by Apple. Apple sells the phone. No Apple China. This is the point you can't understand. Foxconn produces the product, sells it to Apple. And Apple sells it to you. This is how outsourced manufacturing business works.

Think of it like this. You design an electronic product. A camera for example. You give the design to a Chinese company and say you need a 1000 units. Chinese company produces that camera with the design and specs you've provided and they say you owe them 100$ per unit. You buy the cameras from the Chinese company. That part is written to Chinese trade surplus.

You get the cameras. You sell them 200$ per units. That 200$ has nothing to do with China or Chinese company.

suppose Apple has a subsidary company in China then China get full trade surplus of an iphone but the real money go to foxconn only 5%, 95% goes to apple subsidary, and American semiconductor companies.

Profit at iPhone Assembler Foxconn Rose 22% Last Year - WSJ

Foxconn's revenues 130 billion dollars. They've made 4 billion dollar profit.

Apple revenues 233.7 billion dollars. They've made 50 billion dollar profit.

Now you say, like a broken record, that 130 billion dollars that Foxconn makes is something that should be undermined. I don't see a single reason to undermine this 130 billion dollars. This is an economic activity. You don't adjust your trade figures based on profitability. Everyone knows that profitability is relatively low in Chinese companies because of low value addition. That still doesn't hide the fact that those guys are making a lot business activities.

Then these foreign companies move these 94%(=95 - 1%chinese labour cost) profit out of China through another book called account balance. Hence trade surplus is not real money China get.

As I've said before, profitability is something completely different from the revenues.

On another note, China is one of the main consumers of the Apple products. Do you know that each Apple product that a Chinese national buys is regarded as an import? Because technically that product is sold to that individual by Apple Inc. That's why this is extremely hard to determine if there is an actual effect of Apple Inc. or another foreign company that has the ability to actually to contribute meaningful amounts of money to 500 billion dollars trade surplus.

Plus as I've told you before, you take a look at current account surplus to alleviate the effect of foreign company's activity in a country.

The World Factbook

China is No. 2 behind of Germany with 219 billion dollars of account surplus. That money, is stayed in China to it's last penny.

China has 3.3 trillion dollars of foreign reserves, and it peaked around 4 trillion dollars. Where did this money come from then, if Chinese businesses weren't profitable enough and all the trade surplus were actually "taken by" foreign companies?

You know what, it's really exhausting to debunk all those Western media non-sense. I'm a single human being and they have a lot of pen for hire. Go on and believe what you wanna believe. Your belief wouldn't change anything about the world and how things work. You might one day face the truth when China buys half of your countries' exports and pays it in RMB. Because trust me, that will happen.

 

[Aepsilons]

but majority of China trade surplus came from foreign companies operating in China. Soon foreign companies will pull their profit out to the country of its origin.

Why would they do that when the Chinese market is the very paradigm for investing and embedding in China ? Perhaps its better to say that foreign companies operating in China will 'scale back' due to the use of robotics in high level production lines. However, to totally abandon the Chinese market? That would be suicidal given the size of the Chinese domestic market.

In China, there is even a push for foreign companies to develop the interior of China due to the untapped markets there. For example in: Guangxi, Shanxi, Tibet, Xinjiang, Qinghai, Gansu, Chongching, Guizhou et al.

"At the same time, Japanese manufacturers will not leave China en masse in the near future. In part, this is because China now consumes a quarter of all Japanese exports and accounts for almost 10 percent of cumulative Japanese outbound investment globally ($82.5 billion by 2011, $6.8 billion of which came in 2011 alone). Japanese companies operating in China now derive the majority of their revenue selling to Chinese consumers."
​

Reference:
Japan Reconsiders Its Investment in East Asia | Stratfor

 

[somsak]

Please try to understand what I've said. Foxconn sells everything what it produces to Apple. Takes it money. And that money stays in China. Afterwards Apple sells that product and makes money with it. The money that Apple makes isn't written in China's trade surplus. The money that Foxconn makes is written in China's trade surplus. And since that money stays in China, there is nothing wrong about it.

Let me repeat this simple fact again. 100% of the money from the production of Apple products stays in China. Apple pays for what Foxconn produces. Buys the product. And sells it. What Apple sells is not written as China's trade surplus. What Foxconn sells is written as a trade surplus.



Don't suppose it. Because it's not.

How & Where iPhone Is Made: Comparison Of Apple’s Manufacturing Process | CompareCamp.com

In iPhone 6, there was 349 companies from China providing parts for Apple, compared to 139 companies from Japan and 60 companies from US. Now of course not all those companies are owned by Chinese citizens. However the trend of Chinese companies owned by Chinese entrepreneurs providing parts for Apple is also emerging.

http://www.ft.com/intl/cms/s/0/d70fca52-2691-11e3-9dc0-00144feab7de.html#axzz3x91jO26S

The number of Chinese companies supplying Apple with components such as batteries has more than doubled from eight in 2011 to 16 this year, according to Apple’s published lists of suppliers and research from the brokerage CLSA.



The phone you've bought is not sold to you by a subsidary in China. It's sold by Apple. Apple sells the phone. No Apple China. This is the point you can't understand. Foxconn produces the product, sells it to Apple. And Apple sells it to you. This is how outsourced manufacturing business works.

Think of it like this. You design an electronic product. A camera for example. You give the design to a Chinese company and say you need a 1000 units. Chinese company produces that camera with the design and specs you've provided and they say you owe them 100$ per unit. You buy the cameras from the Chinese company. That part is written to Chinese trade surplus.

You get the cameras. You sell them 200$ per units. That 200$ has nothing to do with China or Chinese company.




Profit at iPhone Assembler Foxconn Rose 22% Last Year - WSJ

Foxconn's revenues 130 billion dollars. They've made 4 billion dollar profit.

Apple revenues 233.7 billion dollars. They've made 50 billion dollar profit.

Now you say, like a broken record, that 130 billion dollars that Foxconn makes is something that should be undermined. I don't see a single reason to undermine this 130 billion dollars. This is an economic activity. You don't adjust your trade figures based on profitability. Everyone knows that profitability is relatively low in Chinese companies because of low value addition. That still doesn't hide the fact that those guys are making a lot business activities.



As I've said before, profitability is something completely different from the revenues.

On another note, China is one of the main consumers of the Apple products. Do you know that each Apple product that a Chinese national buys is regarded as an import? Because technically that product is sold to that individual by Apple Inc. That's why this is extremely hard to determine if there is an actual effect of Apple Inc. or another foreign company that has the ability to actually to contribute meaningful amounts of money to 500 billion dollars trade surplus.

Plus as I've told you before, you take a look at current account surplus to alleviate the effect of foreign company's activity in a country.

The World Factbook

China is No. 2 behind of Germany with 219 billion dollars of account surplus. That money, is stayed in China to it's last penny.

China has 3.3 trillion dollars of foreign reserves, and it peaked around 4 trillion dollars. Where did this money come from then, if Chinese businesses weren't profitable enough and all the trade surplus were actually "taken by" foreign companies?

You know what, it's really exhausting to debunk all those Western media non-sense. I'm a single human being and they have a lot of pen for hire. Go on and believe what you wanna believe. Your belief wouldn't change anything about the world and how things work. You might one day face the truth when China buys half of your countries' exports and pays it in RMB. Because trust me, that will happen.

Hey Lure , why do you so presstimistic saying last paragraph. Thank you for your kind explanation. I will read them carefully. well that takes time. My intension is not to show a weak China on the web. My intension is to understand the trade surplus.

 

[oprih]

So thanks to exports only, China is adding several vietnams to its economy. That's awesome.

 

[Shotgunner51]

So thanks to exports only, China is adding several vietnams to its economy. That's awesome.

For 2015:

• Exports was $2.284 trillion
• Imports was $1.689 trillion
• Total trade was $3.973 trillion
• Balance was +$0.5945 trillion (surplus).

Yes, exports is important:

• Major item is Electro-Mechanical products constituting 57% of total exports. Labour-intensive products (e.g. clothing, textiles, footwear, furniture, plastic products, bags, toys, ...) has dropped to 20%.

• Electronics/ICT is another major sector of exports.

• With massive R&D investment (check WIPO reports), High-tech exports has become important drivers in recent years, already reached 29% of total back in 2012. I believe it will go above 30% for 2015, will update you when UN-Comtrade data on high-technology trade is available.

China Exports | 1983-2016 | Data | Chart | Calendar | Forecast | News