U.S. Overstates Trade Deficit With China
Published: March 10, 1993
To the Editor:
"Stirring Giant," your two-part series on China's awakening economy (front page, Feb. 14 and 15), emphasizes the growth of the United States trade deficit with China to $18.2 billion in 1992, the second largest United States import surplus after Japan.
The Clinton Administration should know that Western claims are the opposite of statistics from China. According to a recent Central Intelligence Agency publication, Chinese statistics show a small import surplus from the United States in 1991.
The difference is apparently caused in large part by the inclusion in United States statistics of Hong Kong export surpluses of transshipped mainland goods. Since Hong Kong will revert to China in 1997, United States statisticians are anticipating by about five years.
Another possible explanation of the discrepancy between United States and Chinese claims is the handling of Chinese gold imports, which have risen significantly. United States policy on gold has for decades been aimed at reducing the worldwide significance of gold, since it was a principal export of both the former Soviet Union and South Africa, neither of which was considered particularly friendly.
As a result, United States gold stocks in Fort Knox for the last two decades have been valued at approximately 42 dollars per ounce, about 10 percent of world market prices for gold. This is in contrast to France, where gold reserves are valued at world market prices.
Chinese trade policy, however, is still highly influenced by Maoist ideology, directed toward achieving "balanced equivalents" or lack of significant export or import surpluses with trading partners. This bias showed up in 1972, when Chou Enlai announced that the Chinese, in contrast to other Asian countries occupied by Japanese troops in the 1930's and 40's, would renounce any claims to Japanese reparations since this would presumably mean large Chinese import surpluses from Japan.
Reluctance to run import surpluses still shows up in the "subversiveness" of Chinese dissidents pressing for Japanese reparations. In 1989, according to the Voice of America, the leader of this grass-roots movement, which has collected 35,000 signatures, was placed under house arrest.
In lectures I gave in Beijing last September, I deplored the persistence of the balanced equivalents position and said that this was the golden moment to press Chinese claims. This position was received with enigmatic smiles from my audiences. I would also assume that Japanese businessmen, who are suffering from the worldwide recession, would be pleased should the Japanese Government recognize its moral responsibilities to pay reparations to China.
It is the dynamism of the greater China economy, including Taiwan and Hong Kong, in contrast to the worldwide recession affecting South Korea, Japan and all of Europe, including the former Soviet Union, that has stimulated interest in the Chinese locomotive. LYNN TURGEON Hempstead, L.I., Feb. 24, 1993 The writer retired as professor of economics at Hofstra University.