Saturday, February 20, 2010
Just a few graphs for context on how large the deficit with China is on various scales. The above shows US imports, exports, and deficit both with the world generally, and with China specifically, all as a fraction of US GDP. Obviously, China is not the main cause of deficits generally to date, but it's share is rapidly growing, and in particular, the China deficit was much more recession resistant than the general deficit, so the China deficit as a fraction of the overall deficit has grown very rapidly:
Competition with China is obviously no immediate threat to our laywers, doctors, and hairdressers or indeed to framers and roofers, but rather to manufacturing workers. This motivates considering the ratio of Chinese imports to the components of GDP associated with "Personal Consumption Expenditure on Durable Goods" plus "Private Investment in Equipment and Software". That ratio is as follows:
Finally, the year on year growth in the ratio of Chinese imports to US GDP is as follows:
As you can see, prior to the great recession, the growth rates were astronomical overall. Note that these numbers are from the US Census Bureau (for trade statistics) and Bureau of Economic Analysis (for GDP data), and thus not subject to the general criticism that Chinese official data might be wildly inaccurate.
The Chinese have handled the loss of exports in 2009 with a massive increase in infrastructure investment in their own country (which obviously enhances their ability to manufacture more goods in the future).