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China's GDP depends only for 10 percent on export - Arthur Kroeber

Arthur Kroeber
by Fons1 via FlickrUnlike popular believe China's GDP depends only for ten percent on export, not 40 percent, says Arthur Kroeber, manager director of Beijing-based research firm Dragonomics, according to Sify. The limits the country's exposure against failling export considerably.


China's dependence on exports is not as heavy as may seem at first glance. Officially, exports account for 37 per cent of its revenues and seem to be the driver of the Chinese economy.
But independent surveys by Dragonomics, an advisory firm specializing in China, put its "true" export share at just under 10 per cent of its GDP.
It is internal investments, which account for 40 per cent of its GDP, that are the driving force of China's economy. Although part of them is channeled into export-oriented projects, the global financial crunch will not slow China considerably.
Economics focus

An old Chinese myth
Jan 3rd 2008
From The Economist print edition

Contrary to popular wisdom, China's rapid growth is not hugely dependent on exports


MOST people suppose that China's economic success depends on exporting cheap goods to the rich world. If so, its growth would be seriously dented by a stuttering American economy. Headline figures show that China's exports surged from 20% of GDP in 2001 to almost 40% in 2007, which seems to suggest not only that exports are the main driver of growth, but also that China's economy would be hit much harder by an American downturn than it was during the previous recession in 2001. If exports are measured correctly, however, they account for a surprisingly modest share of China's economic growth.

The headline ratio of exports to GDP is very misleading. It compares apples and oranges: exports are measured as gross revenue while GDP is measured in value-added terms. Jonathan Anderson, an economist at UBS, a bank, has tried to estimate exports in value-added terms by stripping out imported components, and then converting the remaining domestic content into value-added terms by subtracting inputs purchased from other domestic sectors. At first glance, that second step seems odd: surely the materials which exporters buy from the rest of the economy should be included in any assessment of the importance of exports? But if purchases of domestic inputs were left in for exporters, the same thing would need to be done for all other sectors. That would make the denominator for the export ratio much bigger than GDP.

Once these adjustments are made, Mr Anderson reckons that the "true" export share is just under 10% of GDP. That makes China slightly more exposed to exports than Japan, but nowhere near as export-led as Taiwan or Singapore (which on January 2nd reported an unexpected contraction in GDP in the fourth quarter of 2007, thanks in part to weakness in export markets). Indeed, China's economic performance during the global IT slump in 2001 showed that a collapse in exports is not the end of the world. The annual rate of growth in its exports fell by a massive 35 percentage points from peak to trough during 2000-01, yet China's overall GDP growth slowed by less than one percentage point. Employment figures also confirm that exports' share of the economy is relatively small. Surveys suggest that one-third of manufacturing workers are in export-oriented sectors, which is equivalent to only 6% of the total workforce.

Even if the true export share of GDP is smaller than generally believed, surely the dramatic increase in China's exports implies that they are contributing a rising share of GDP growth? Mr Anderson's work again counsels caution. Although the headline exports-to-GDP ratio has almost doubled since 2000, the value-added share of exports in GDP has been surprisingly stable over the same period (see left-hand chart). This is explained by China's shift from exports with a high domestic content, such as toys, to new export sectors that use more imported components. Electronic products accounted for 42% of total manufactured exports in 2006, for example, up from 18% in 1995. But the domestic content of electronics is only a third to a half that of traditional light-manufacturing sectors. So in value-added terms exports have risen by far less than gross export revenues have.


Many of China's foreign critics remain sceptical. They argue that China's massive current-account surplus (estimated at 11% of GDP in 2007) proves that it produces far more than it consumes and relies on foreign demand to buy the excess. In the six years to 2004, net exports (ie, exports minus imports) accounted for only 5% of China's GDP growth; 95% came from domestic demand. But since 2005, net exports have contributed more than 20% of growth (see right-hand chart).

This is due not to faster export growth, however, but to a sharp slowdown in imports. And even if the contribution from net exports fell to zero, China's GDP growth would still be close to 9% thanks to strong domestic demand. The boost from net exports is in any case unlikely to vanish, even if America does sink into recession, because exports to other emerging economies, where demand is more robust, are bigger than those to America. According to Standard Chartered Bank, Asia and the Middle East accounted for more than 40% of China's export growth in the first ten months of 2007, North America for less than 10%.

Multiplier effects
China's economy is driven not by exports but by investment, which accounts for over 40% of GDP. This raises an additional concern: that weaker exports could lead to a sharp drop in investment because exporters would need to add less capacity. But Arthur Kroeber at Dragonomics, a Beijing-based research firm, argues that investment is not as closely tied to exports as is often assumed: over half of all investment is in infrastructure and property. Mr Kroeber estimates that only 7% of total investment is directly linked to export production. Adding in the capital spending of local firms that produce inputs sold to exporters, he reckons that a still-modest 14% of investment is dependent on exports. Total investment is unlikely to collapse while investment in infrastructure and residential construction remains firm.

An American downturn will cause China's economy to slow. But the likely impact is hugely exaggerated by the headline figures of exports as a share of GDP. Dragonomics forecasts that in 2008 the contribution of net exports to China's growth will shrink by half. If the impact on investment is also included, GDP growth will slow to about 10% from 11.5% in 2007. This is hardly catastrophic. Indeed, given Beijing's worries about the economy overheating, it would be welcome.

The American government frequently accuses China of relying excessively on exports. But David Carbon, an economist at DBS, a Singaporean bank, suggests that America is starting to look like the pot that called the kettle black. In the year to September, net exports accounted for more than 30% of America's total GDP growth in 2007. Another popular belief looks ripe for reappraisal: it seems that domestic demand is a bigger driver of China's growth than it is of America's.


<img src="media.economist.com/im...">]]> Tue, 17 Feb 2009 10:32:04 -0500

China's GDP depends only for 10 percent on export - Arthur Kroeber

Arthur Kroeber
by Fons1 via FlickrUnlike popular believe China's GDP depends only for ten percent on export, not 40 percent, says Arthur Kroeber, manager director of Beijing-based research firm Dragonomics, according to Sify. The limits the country's exposure against failling export considerably.


China's dependence on exports is not as heavy as may seem at first glance. Officially, exports account for 37 per cent of its revenues and seem to be the driver of the Chinese economy.
But independent surveys by Dragonomics, an advisory firm specializing in China, put its "true" export share at just under 10 per cent of its GDP.
It is internal investments, which account for 40 per cent of its GDP, that are the driving force of China's economy. Although part of them is channeled into export-oriented projects, the global financial crunch will not slow China considerably.
Economics focus

An old Chinese myth
Jan 3rd 2008
From The Economist print edition

Contrary to popular wisdom, China's rapid growth is not hugely dependent on exports


MOST people suppose that China's economic success depends on exporting cheap goods to the rich world. If so, its growth would be seriously dented by a stuttering American economy. Headline figures show that China's exports surged from 20% of GDP in 2001 to almost 40% in 2007, which seems to suggest not only that exports are the main driver of growth, but also that China's economy would be hit much harder by an American downturn than it was during the previous recession in 2001. If exports are measured correctly, however, they account for a surprisingly modest share of China's economic growth.

The headline ratio of exports to GDP is very misleading. It compares apples and oranges: exports are measured as gross revenue while GDP is measured in value-added terms. Jonathan Anderson, an economist at UBS, a bank, has tried to estimate exports in value-added terms by stripping out imported components, and then converting the remaining domestic content into value-added terms by subtracting inputs purchased from other domestic sectors. At first glance, that second step seems odd: surely the materials which exporters buy from the rest of the economy should be included in any assessment of the importance of exports? But if purchases of domestic inputs were left in for exporters, the same thing would need to be done for all other sectors. That would make the denominator for the export ratio much bigger than GDP.

Once these adjustments are made, Mr Anderson reckons that the "true" export share is just under 10% of GDP. That makes China slightly more exposed to exports than Japan, but nowhere near as export-led as Taiwan or Singapore (which on January 2nd reported an unexpected contraction in GDP in the fourth quarter of 2007, thanks in part to weakness in export markets). Indeed, China's economic performance during the global IT slump in 2001 showed that a collapse in exports is not the end of the world. The annual rate of growth in its exports fell by a massive 35 percentage points from peak to trough during 2000-01, yet China's overall GDP growth slowed by less than one percentage point. Employment figures also confirm that exports' share of the economy is relatively small. Surveys suggest that one-third of manufacturing workers are in export-oriented sectors, which is equivalent to only 6% of the total workforce.

Even if the true export share of GDP is smaller than generally believed, surely the dramatic increase in China's exports implies that they are contributing a rising share of GDP growth? Mr Anderson's work again counsels caution. Although the headline exports-to-GDP ratio has almost doubled since 2000, the value-added share of exports in GDP has been surprisingly stable over the same period (see left-hand chart). This is explained by China's shift from exports with a high domestic content, such as toys, to new export sectors that use more imported components. Electronic products accounted for 42% of total manufactured exports in 2006, for example, up from 18% in 1995. But the domestic content of electronics is only a third to a half that of traditional light-manufacturing sectors. So in value-added terms exports have risen by far less than gross export revenues have.


Many of China's foreign critics remain sceptical. They argue that China's massive current-account surplus (estimated at 11% of GDP in 2007) proves that it produces far more than it consumes and relies on foreign demand to buy the excess. In the six years to 2004, net exports (ie, exports minus imports) accounted for only 5% of China's GDP growth; 95% came from domestic demand. But since 2005, net exports have contributed more than 20% of growth (see right-hand chart).

This is due not to faster export growth, however, but to a sharp slowdown in imports. And even if the contribution from net exports fell to zero, China's GDP growth would still be close to 9% thanks to strong domestic demand. The boost from net exports is in any case unlikely to vanish, even if America does sink into recession, because exports to other emerging economies, where demand is more robust, are bigger than those to America. According to Standard Chartered Bank, Asia and the Middle East accounted for more than 40% of China's export growth in the first ten months of 2007, North America for less than 10%.

Multiplier effects
China's economy is driven not by exports but by investment, which accounts for over 40% of GDP. This raises an additional concern: that weaker exports could lead to a sharp drop in investment because exporters would need to add less capacity. But Arthur Kroeber at Dragonomics, a Beijing-based research firm, argues that investment is not as closely tied to exports as is often assumed: over half of all investment is in infrastructure and property. Mr Kroeber estimates that only 7% of total investment is directly linked to export production. Adding in the capital spending of local firms that produce inputs sold to exporters, he reckons that a still-modest 14% of investment is dependent on exports. Total investment is unlikely to collapse while investment in infrastructure and residential construction remains firm.

An American downturn will cause China's economy to slow. But the likely impact is hugely exaggerated by the headline figures of exports as a share of GDP. Dragonomics forecasts that in 2008 the contribution of net exports to China's growth will shrink by half. If the impact on investment is also included, GDP growth will slow to about 10% from 11.5% in 2007. This is hardly catastrophic. Indeed, given Beijing's worries about the economy overheating, it would be welcome.

The American government frequently accuses China of relying excessively on exports. But David Carbon, an economist at DBS, a Singaporean bank, suggests that America is starting to look like the pot that called the kettle black. In the year to September, net exports accounted for more than 30% of America's total GDP growth in 2007. Another popular belief looks ripe for reappraisal: it seems that domestic demand is a bigger driver of China's growth than it is of America's.


<img src="media.economist.com/im...">]]> http://seekingalpha.com/article/120499-nationalizing-the-u-s-banking-sector-there-s-no-choice?source=feed#comment-387081 387081 Fri, 13 Feb 2009 10:29:46 -0500 http://seekingalpha.com/article/120007-12-reasons-to-short-gold?source=feed#comment-385168 385168 Thu, 12 Feb 2009 06:54:24 -0500 http://seekingalpha.com/article/118999-the-u-s-dollar-waiting-to-tank-gold-s-run?source=feed#comment-378081 378081 Fri, 06 Feb 2009 08:56:19 -0500 http://seekingalpha.com/article/116404-the-end-of-gold?source=feed#comment-366539 366539 Mon, 26 Jan 2009 11:33:23 -0500 http://seekingalpha.com/article/115453-yellow-gold-vs-crude-black-gold-who-s-ready-to-rally?source=feed#comment-360613 360613 Tue, 20 Jan 2009 06:37:03 -0500 http://seekingalpha.com/article/115259-treasuries-true-risk?source=feed#comment-359347 359347
Unique Red Feather Money of Temotu
BY GINA MAKA'A
Before introduction of money in Solomon Islands, the currency came in different forms for the nine provinces of the country.
Of the many examples is the famous red feather money from Santa Cruz Islands of Temotu Province.
The red feather money is two inch wide and 30 feet long made out of glued fiber feathers, particularly the downy red feathers plucked from the breast, head and back of a tropical forest bird.
The bird which the money is made out from is a small scarlet colored honey eater, which in scientific term is called the myzomela carnalis of the rain forest.
In an interview with Solomon Times, Patricia Luilamo who works at the National Museum of Solomon Islands, and from Temotu Province, said that the money is produced by the natives of Santa Cruz and used mainly by their people for bride price, compensation and land.

She told Solomon Times that in the ancient days, the money is distributed to other islands in Temotu Province like the reef islands.

"One special thing about the red feather money in the olden days is that once our people in Santa Cruz give the money to neighbouring islands, sometimes the islanders will have to export some of their women to Santa Cruz as concubines, unlike today women go to other islands as wives only."

Mrs. Luilamo said that today, the red feather money is no longer practiced because changes taking place in the country now.

"But as a person from Temotu, I am proud to say that our traditional money is unique and has a very special feature unlike other traditional money from other provinces."
]]> Sun, 18 Jan 2009 19:51:51 -0500
Unique Red Feather Money of Temotu
BY GINA MAKA'A
Before introduction of money in Solomon Islands, the currency came in different forms for the nine provinces of the country.
Of the many examples is the famous red feather money from Santa Cruz Islands of Temotu Province.
The red feather money is two inch wide and 30 feet long made out of glued fiber feathers, particularly the downy red feathers plucked from the breast, head and back of a tropical forest bird.
The bird which the money is made out from is a small scarlet colored honey eater, which in scientific term is called the myzomela carnalis of the rain forest.
In an interview with Solomon Times, Patricia Luilamo who works at the National Museum of Solomon Islands, and from Temotu Province, said that the money is produced by the natives of Santa Cruz and used mainly by their people for bride price, compensation and land.

She told Solomon Times that in the ancient days, the money is distributed to other islands in Temotu Province like the reef islands.

"One special thing about the red feather money in the olden days is that once our people in Santa Cruz give the money to neighbouring islands, sometimes the islanders will have to export some of their women to Santa Cruz as concubines, unlike today women go to other islands as wives only."

Mrs. Luilamo said that today, the red feather money is no longer practiced because changes taking place in the country now.

"But as a person from Temotu, I am proud to say that our traditional money is unique and has a very special feature unlike other traditional money from other provinces."
]]> http://seekingalpha.com/article/113502-gold-s-not-the-best-investment-in-inflationary-times?source=feed#comment-348279 348279 Wed, 07 Jan 2009 06:42:08 -0500 http://seekingalpha.com/article/113149-gold-recycling-threatens-demand-supply-equation?source=feed#comment-346120 346120 Mon, 05 Jan 2009 05:49:21 -0500 http://seekingalpha.com/article/113149-gold-recycling-threatens-demand-supply-equation?source=feed#comment-346119 346119 Mon, 05 Jan 2009 05:39:22 -0500 http://seekingalpha.com/article/112625-returning-to-a-gold-standard-is-a-bad-idea?source=feed#comment-346116 346116 Mon, 05 Jan 2009 05:32:09 -0500