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Lu Zhongyuan, vice president and senior research fellow of Development Research Center of the State Council (DRC) said at the 2010 China Economic Outlook Forum that people currently in and outside China have a variety of misunderstandings about China's foreign trade. He pointed out and clarified some of the misunderstandings.
Misunderstanding 1: China's an export-dependent country
Lu pointed out that it is not accurate to say China's an export-dependent country and its economic growth model is export-led.
He said that in recent years from 2001 to 2007, the economic growth was mainly driven by consumption and investment. For example, the contribution of investment and consumption in 2001 was 4.1% and 4.2%, while net export was -0.1%and there was economic growth of 8.3% that year. Take another example, from 2005-2007, net export contributed to 0.2-0.7% growth, and the remaining 8% came from investment and consumption. These two domestic demands respectively contributed to about 4.2% growth. Thus, we can tell that China's economic growth is not driven mainly by external demand.
"I do not know why they come to such a conclusion (China's economic growth is export-led). This argument has no basis in fact," Lu said.
Misunderstanding 2: Use appreciation of RMB to help China's exports
Lu Zhongyuan believes that China has a comparative advantage, reflected in the proprietary elements, namely, labor and land. This becomes a competitive advantage of China's low-end industry. This international division of the industry chain is not a bad thing for China.
"We export a lot, and this is not our fault. Chain of international division of labor is led by multinational companies in developed countries. Is it possible for appreciation of the renminbi to change this pattern of international division of labor?" Lu Zhongyuan said, "Only if the pattern of international division of labor changes can we solve the problem of China exporting a lot. But which government of the developed countries has the ability to stop multinational companies from doing this? It is difficult. Therefore, China's exporting a lot is not China's fault. "
Misunderstanding 3: Simply accusing China's high dependence on export
Lu Zhongyuan acknowledged that Chinese enterprises made very little overseas investment, simply judging by GDP, China's economic dependence on exports is very high.
"But do not forget developed countries have a large number of multinational companies overseas. Gross national income multinational companies have created abroad is much larger than their national GDP. Multinational companies do not need to export from its homeland. Their branches are located around the world, and then count their revenues into their country's own gross national income, "said Lu.
The situation in China is quite the contrary. Lu Zhongyuan said overseas investment of Chinese enterprises face barriers and blockades everywhere, so China has to take advantage of its comparative advantages, and to undertake international industrial transfer. "Causes of international division of labor are a complex problem. We can not simply say that China's reliance on export is high, and China has become the cause and the curse of the problem."
Misunderstanding 4: China's export led economic imbalances the world
"China's exports accounted for a very low proportion of the worlds. In 2008, China accounted for only 8%, while Germany 9%, why not say Germany puts the world economy out of balance? In 2007 China's exports account for only 5% of total exports of high-income countries, and why not say that the export of high-income countries puts the world economy out of balance? "When talking about China's exports being accused of leading to imbalances in the world economy, Lu Zhongyuan retorted with reference to the above figures.
Lu thinks that there is a big problem in the existing statistical methods used in international trade. For example, the manufacturer's price of China's export iPod is 150 U.S. dollars, and its market retail price is 300 U.S. dollars. China only gained 3 to 5 U.S. dollars in processing fees, leaving more than 140 U.S. dollars value added in Japan. Therefore, exports of an iPod from China can only count five U.S. dollars, not the total 150 U.S. dollars.
Lu Zhongyuan said, "recently, a retired Chinese American vice minister of the U.S. Department of Labor came up with a very good suggestion, saying that if we want Western countries to accept our point of view, we must change some statistical methods. The current statistical methods are a legacy of the industrial revolution era. We should now design a new method of calculation according to the new situation of economic development, so that will be able to objectively reflect the proportion of China's total exports to the world. "
By People's Daily Online
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