It's Okay to Buy Chinese Goods

Posted by - Friday, August 12th, 2011

When it comes to stimulating the United States economy, most would assume that the best solution is to stop buying all those “Made in China” labels.

But a new report by the Federal Reserve Bank of San Francisco has shown that Chinese imports are not actually hurting us.

In fact, of the revenue brought in by Chinese-made goods, more than half stay in the U.S. anyway going to the companies that sold the product, workers and retailers in charge of product handling, and transportation costs, among other things.

The report actually indicates that an average 55 cents of every dollar brought in by Chinese-made goods stays right here in the U.S.

CNN Money highlights some major points of the report:

…[I]mports from China make up just a very small portion of our total economy: just 2.5% of gross domestic product in 2010. Overall, products from around the world accounted for only 16% of our GDP last year.

Instead, a huge amount of consumer spending actually goes to services, which are by default American-produced.

The report lists clothing and shoes as the most-imported goods. But two-thirds of spending is on services.

In addition, CNN Money notes that according to the report, even Chinese-made goods aren’t fully made from Chinese components.Foreign Goods

Federal Reserve Bank of San Francisco

The iPhone is used as an example.

In the United States, an iPhone costs approximately $500. Of that $500, only $179 goes to China for production costs.

But $172.50 of that is used to import components from foreign countries. One of these countries is the U.S.

So in all, China actually requires just $6.50 to assemble an iPhone.

As CNN Money says, the report was compiled to quell fears that increasing Chinese inflation will directly affect the prices of goods the U.S. imports.

Considering the small percentage of the cost actually required by China, we shouldn’t have a problem.

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