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FP: The myth of "Made in China"

Authors: Robert Koopman, Zhi Wang, and Shang-Jin Wei
June 10, 2009

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Chinese exports aren't entirely Chinese---and neither is the U.S.-China trade deficit.

From shoes to electronics to kitchen appliances, that ubiquitous stamp, "Made in China," has become a symbol of the times. In the last decade, annual U.S. imports from China have grown from about $81 billion to last year's $338 billion. Everything, it seems, comes from the Middle Kingdom.

But as it turns out, "Made in China" is a bit of a misnomer these days. Over the last 20 years, supply chains have fragmented across the globe -- with one part made here, and another made there. Rarely is any one product made in any one country. China often specializes in the final stage of production: putting components together before exporting to the final users. Indeed, much of the value of U.S. imports from China, and similarly from Mexico, includes parts and components made in other countries--the United States among them. According to our recent study, domestic content (the stuff that directly contributes to domestic economic growth) makes up about 45 percent of Chinese exports and 34 percent of Mexican exports to the United States. The rest comes to China from abroad to be assembled and sold. A tag like "Made in China, Vietnam, the United States, Japan, and China again," might be more apt.

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