The US-China Business Council’s 2017 reports on state and congressional district exports are out and their findings are clear - though China’s economic growth rate is slowing, it remains an important market for US exports and continues to provide growing opportunities for American businesses, large and small.
At the same time, US exports to China under perform what they could be, given the barriers that frustrate full market access to the world’s second largest economy.
Exports continue to play an essential role in the US economy and job growth and the gains are felt widely throughout the country. US exports to China directly and indirectly supported 2.6 million jobs and $165 billion in GDP in 2015.
In 2016, US goods exports to China totaled $113 billion, holding steady with the previous year and still the third-largest US goods export market behind Canada and Mexico.
In 2015, the most recent complete year of available data, US services exports to China totaled $47 billion, making China the United States’ third-largest services export market.
These figures come after a decade of consistent growth.
Last year, 29 states exported more than $1 billion in goods to China and 12 states exported more than $1 billion in services exports. In 2006, only 17 states exported more than $1 billion of goods to China and only one state exported more than $1 billion in services to China – California.
Out of 435 congressional districts, 432 districts had triple-digit growth in service exports to China since 2006.
From 2006 to 2015, US services exports to China increased more than 400 percent. Services exports to the rest of the world increased 76 percent.
Global trade is slowing, but exports of US goods and services to China continue to outpace exports to other major markets.
On average, US goods exports to China grew by 8 percent annually over the past 10 years, despite the modest decline over the past two years versus 2014.
US services exports to China grew more rapidly than all other major trading partners, averaging nearly 19 percent annually over the last decade.
Of the United States’ top 10 goods export markets, only Japan had positive export growth in 2016, reflecting an overall slowdown in global trade.
While this data shows one side of the relationship – US exports – the United States’ large trade deficit with China is also part of the story. According to Oxford Economics, a better calculation of the trade deficit would take into account China’s role as the “Great Assembler.”
Although China has been trying to increase its domestic consumption and move up the value-added chain, the latest data suggests that even in key growth markets—computer equipment, electronics, and electrical machinery—the foreign content of goods assembled and reexported from China is still roughly 50 percent.
In other words, much of what US imports from China originates in other markets, including the United States.
Adjusting the trade balance to account for the value-added content of exports cuts the US trade deficit with China in half, to about 1 percent of GDP. Using this methodology endorsed by the OECD, this amount is broadly equivalent to the US trade deficit with the European Union.
The number of Chinese middle-class consumers will exceed the entire population of the United States by 2026, providing American companies with significant opportunities to tap into a new and lucrative customer base that can further boost employment and economic growth.
Reducing market access barriers in China so that companies can realize this potential is a top priority for the American business community.