China Trade Surplus: Gusher Profits for U.S. Corporations August 13, 2005
Charles Hugh Smith - Weblog "Alarmist headlines blare the "bad news": China's trade surplus with the U.S. is at record highs. But if this is so bad for the U.S., why are U.S. corporate profits at record highs? Could the two facts be related? Of course they are. U.S. companies' manufacturing of goods in China is creating enormous profits, not for the Chinese but for American corporations.
As every American shopper knows, American companies are having just about everything made in China these days-- to the tune of about $230 billion a year. In doing so, they have slashed manufacturing costs in half or more, even including the cost of shipping. But have you ever noticed the price of these items dropping in half as a result of these cost savings? Of course not. The companies have been retaining the savings as corporate profits.
Just how big are corporate profits nowadays? Try $1.1 trillion--fully 10% of the entire U.S. GDP. As a result, U.S. corporations are sitting on a cash horde of some $634 billion, which is rising by tens of billions each year.
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SnipBut the elephant in the room no one talks about is the enormous U.S corporate profits being made by moving manufacturing to China. John Q. Citizen naively assumes China is making huge profits selling stuff to American consumers, but this is simply incorrect; how many items do we buy made by Chinese corporations? Virtually nothing; maybe a few million dollars' worth of Haier dorm-room fridges and some foodstuffs, but everything else is made in China either by or for American corporations.
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http://www.oftwominds.com/blogs/China-trade.html