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Not as much 'Made in China' as you might think

August 12, 2011 | 11:37 am

China Feeling guilty that those new sneakers you just bought were made in China, rather than the good ol' U.S.A.? Don't worry about it, say economists from the San Francisco Fed. Things made here still dominate the market.

Goods and services from China accounted for only 2.7% of U.S. personal consumption spending in 2010, according to the report, The U.S. Content of "Made in China." About 88.5% of U.S. spending last year was on goods made here.

"Although globalization is widely recognized these days, the U.S. economy actually remains relatively closed," wrote economist Galina Hale and researcher Bart Hobijn, in the report. "The vast majority of goods and services sold in the United States is produced here."

The largest share of products bought here but made in China is in the durable goods category, which includes cars, furniture and household equipment. About 12% of goods purchased in that category are made in China. Only 6% of nondurables -- including food, clothing, and fuel -- purchased here are made in China.

But even those goods made in China can contribute to the U.S. economy,  since U.S. companies earn money from shipping them here and selling them in stores. Some of the money spent on a $70 pair of sneakers made in China goes to the company that ships them here, the retail store that sells them and the marketers who try to sell them.

More than one-third of the price we pay for imported goods goes to U.S. companies, the researchers say, a fraction that's higher for Chinese goods.

"On average, of every dollar spend on an item labeled 'Made in China,' 55 cents goes for services produced in the United States," the report says.

These are important numbers to note as China's inflation rate grows, and goods and services produced there get more expensive. China's inflation rate this year is close to 5%. Those inflation numbers won't be as crippling to the economy as you might assume.

"It is unlikely that recent increases in labor costs and inflation in China will generate broad-based inflationary pressure in the United States," researchers say.


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China's trade surplus surges

Rising inflation may force China to let currency appreciate

-- Alana Semuels

Photo credit:  Undertown851 via Flickr