The myth of the rich, hungry Chinese consumer

The lead article in Monday’s business section of the Washington Post on the reported “boom” in U.S. exports to China painted an inaccurate and distorted view of U.S.-China trade. Headlined by a photo of Chinese Vice President Xi Ping visiting an Iowa family farm in February, the article claimed that a “richer China” has a “growing appetite for … American soybeans, cars, airplanes and medicine.” While the article does acknowledge the soaring U.S. trade deficit with China, it claims that such exports are a “bright spot.” In fact, those exports are swamped by soaring imports and trade deficits with China, which displaced 2.8 million U.S. jobs between 2001 and 2010 alone.

Review of actual trends in U.S. exports to China paints a very different picture than the one described in the Post article. Waste and scrap were the fastest growing U.S. exports to China, increasing $3.0 billion in 2011 (25.8 percent). The growth in agricultural products ranked a distant fifth on this list, increasing $0.9 billion (6.0 percent). Of the 10 fastest growing exports to China, seven were unprocessed commodities (as indicated by the black bars), including paper products, because 61.0 percent of U.S. paper exports to China in 2011 were unprocessed wood pulp. The vast majority of such exports are used as inputs for making paper and other products for export, not for Chinese domestic consumption.  Overall, although total U.S. exports to China increased $11.2 billion in 2011, imports increased by $34.4 billion and the trade deficit increased $23.3 billion. U.S. export of raw materials so that China, not the United States, can make higher value-added industrial products is an ongoing recipe for the decline of American manufacturing and for North American economic failure.

The Post cites unnamed experts who claimed that the main reason for the increased exports “is a booming China where wealthier tastes include an increased appetite for meat—and hence for soybeans used as livestock feed.” The growth in demand for grains pales in comparison to China’s voracious appetite for waste, paper and metal scrap, chemicals, minerals and ores and raw wood—commodities China turns into job-displacing exports. The rapid growth of Chinese exports to the U.S. and the world are the source of China’s growing wealth, and such wealth has not resulted in exports to China growing “exponentially” (e.g., faster and faster each year), another flawed claim from this report. Exports in 2011 increased at the third-slowest rate since China joined the World Trade Organization in 2001. Export growth was slower only in the recession years of 2008 and 2009. Sadly, our exports to China are more closely tied to China’s demand for U.S. raw materials for its own production and exports than to Chinese consumers’ appetites for our products.

This story would be a good candidate for review by the Post‘s Fact Checker. We give it three Pinocchios.

– The author thanks Ross Eisenbrey and Doug Hall for helpful comments and Hilary Wething for research assistance.