Ties That Bind - Bay Area Council Economic Institute

Bay Area-China Trade: Behind the Numbers
Finally, the nationality of trade value in a global marketplace can be deceptive. Many finished
goods produced in China are made from raw materials or components—wastepaper, metal and
plastic scrap, raw cotton, forest products, chemical resins, steel, aluminum, semiconductors, circuit
boards, industrial controls and gauges—originating in the U.S. or third countries. While it is
true that China’s manufacture/assembly activity has a greater value-added component than the
inputs, basic manufacturing has become increasingly commoditized. Most of the retail value of a
wide variety of products made in China—flat-panel displays, apparel, appliances, home furnishings,
sporting goods, and so on—is created on this side of the Pacific with advanced R&D,
product and packaging design, technology features, distribution, marketing, branding and advertising.
Wealth creation, in this sense, is not synonymous with trade.
Transactions in which physical goods are not involved—services, direct and portfolio investment,
capital flows of various kinds—are not subject to the same comprehensive reporting requirements,
and are extremely difficult to track. Services trade is measured nationwide or by state
within the U.S. but not broken out by metropolitan area. Foreign direct investment and mergers/acquisition
activity are typically tracked only for transactions above a certain size. Still others,
such as real estate purchases, are not tracked by nationality. Announced deals are not necessarily
completed deals, and completed deals are not necessarily successful deals creating lasting enterprises.
As a result, definitive data are mostly unavailable.
That having been said, we can begin to assemble a picture, however imperfect, of the scale of the
Bay Area-China commercial relationship through a combination of statistics and anecdote. We
can examine key Bay Area sectors—financial and legal services, architecture and engineering,
internet portal, information technology services, semiconductors, biotechnology, advertising—
and how their activities are reshaping China’s society and economy. Through interviews, industry
and university studies, articles and web sites, we can form a picture of the significant economic
and technological cross-pollenation that has taken place between the Bay Area and greater
China—and the jobs, business activity and personal wealth they have created on both sides of
the Pacific.
Bay Area Ports: Moving the Goods
The vast majority of manufactured goods flowing between the Bay Area and China move by
ship. Nearly all of it moves in containers of various sizes, primarily in 40-foot container equivalent
units (FEUs). Nearly all of this volume flows through the Port of Oakland, the United
States’ fourth busiest container port, which opened an office in Shanghai in 2006 to promote
increased traffic in consumer goods from China to the Bay Area, and farm and other products
from the Bay Area to China.
China Is Driving Import Growth
Containerized imports from the PRC, Hong Kong and Taiwan through the Northern California
Customs district have increased from 90,000 FEUs in 2001 to 219,000 FEUs in 2005, according
to the Port Import-Export Reporting Service (PIERS), a trade data service. A breakdown of
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