Items "made in China" generate income elsewhere
The United States is an exporter of more services than it imports to China and it is clear that it is a net exporter of the services. On the other hand, as the products find their way back to the US market, they are considered as imports. It implies that US imports more goods from china than China imports from US. The trade deficit is hence widened by the fact that more commodities leave china entering US. In this regard, China is a net exporter in comparison to the trade between the two countries. The tradeoff leaves US with a greater magnitude of the deficit as it is regarded as a net importer, and the higher percentage (70 percent) validates this point.
The earnings of the managers and Chineses employees are likely to be part of the Chineses residents' expenditures on the goods exported from United States. The rationale behind it is that as the services that are exported to China are paid for by the Unites States companies. It represents one of the situations in which the managers are paid since the services that the products receive in china are paid for and attract salaries for the parties involved in China. The amount used by the Chinese residents on consumption of the goods is reciprocated back to their economy in the form of salaries to both the employees and managers. It is received by the direct, indirect employees concerned in the lines of production of the US exported unfinished goods. Even though the whole amount (price tag) charged on the goods does not remain wholly in the hands of the United States companies and individuals, the amount that is left in the hands of the Chinese managers and employees is not significant.
