This headline is useless to understanding a nation's economy


The WSJ ran this headline and story today:

China reports biggest-ever annual trade surplus with the US: WSJ reports, China reported its largest-ever yearly trade surplus with the U.S. last year while its overall imbalance with the world shrank, potentially strengthening the Trump administration’s case for tougher penalties and other trade actions against Beijing.

The metric is useful for lazy politicians but is useless otherwise.

A trade surplus is a useless metric to gauge the state of a nation's economy, but it is a beautiful tool for pandering campaign rhetoric.

You need to remember, at its core China is an assembly economy. 

Thus China's economy is a prime example of the obvious statement that the whole is great than the sum of its parts. 

Most Chinese companies import components and materials from around the world and then assemble them into useful products for sale globally.

No R&D. No branding. No marketing. No finance. No software. No logistics.

All actives not measured by current trade surplus formulations.

Marc Ross

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