II.Statistical Difference in Sino-US
Trade Balance
In recent years, bilateral trade balance, particularly huge US trade
deficit from its trade with China as claimed by the US side, has roused
extensive attention. Statistics and analyses prove it true that Sino-US
trade has been in favour of China in recent years, but it is obvious that
the size of the US de cit has been largely exaggerated by the US side.
Statistics from the US side indicate that Sino-US trade had been in
favour of the US side during the 1979-82 period, but the United States
started suering from decit in 1983 and the gure amounted to 39.5 billion
US dollars in 1996. Chinese statistics, however, indicate that China had
suered from decit in the bilateral trade during the 14 years between 1979
and 1992. Surplus rst appeared in 1993 and the figure rose to 10.5
billion US dollars in 1996. Obviously, there exists remarkable difference
between China and the United States in their estimation of bilateral
trade balance situation (see Table 1).
Table 1 Sino-US Trade Statistics
(in billions of US dollars)
Chinese statistics US statistics
Chinese Chinese Balance US US Balance
exports imports exports imports
1993 16.97 10.69 6.28 8.77 31.54 -22.77
1994 21.46 13.97 7.49 9.29 38.78 -29.49
1995 24.71 16.12 8.59 11.75 45.56 -33.81
1996 26.69 16.16 10.53 11.97 51.49 -39.52
Data sources: Chinese Customs and US Department of Commerce
To diagnose the large difference in the bilateral trade statistics by
China and the United States and the large US trade deficit against China
under US statistics, the US side agreed to a proposal made by China in
1994 on establishing a bilateral trade statistics expert group under the
Sino-US Joint Commission on Commerce and Trade to undertake special
studies of the subject. US members in the group were composed of experts
from the Census Bureau of the Department of Commerce of the United
States, while Chinese members in the group were experts from the Ministry
of Foreign Trade and Economic Co-operation and the General Administration
of Customs. The experts from both sides completed the work report of the
Trade Statistics Subgroup of the Trade and Investment Working Group of
the Sino-US Joint Commission on Commerce and Trade on the basis of
abundant facts after they spent more than one year comparing 1992 and
1993 statistical data from China, the United States and the Hong Kong
region, processing several hundred thousand records, sorting out several
hundred analysis tables. The report believed that the US statistics had
over-estimated at least the following factors in producing the large
trade deficit against China:
First, the US import statistics has ignored entrepot trade and value
added from entrepot trade to over-estimate its imports from China. A
large part of Sino-US trade is conducted through entrepot trade via a
third place. Under Chinese statistics, 60% of Chinese exports to the
United States are conducted through entrepot trade via a third place,
mainly the Hong Kong region. According to US information, only 20% of
Chinese goods are directly shipped to the United States, while the
remaining 80% get into the United States through a third place. It is
obvious that the added value created at the third place after the goods
have left China shall not be calculated as exports from China. The
conclusion of the Trade Statistics Subgroup of the Trade and Investment
Working Group of the Sino-US Joint Commission on Commerce and Trade was:
The average rate of value-adding of Chinese exports to the United States
via the Hong Kong region was 40.7% in the past two years, which was far
above the re-export value-adding rate under general circumstances. The
value adding rate of some of the major re-exported commodities, such as
toys and knitwear, even exceeded 100%. Chinese mainland products acquired
an added value of 5.23 billion US dollars in 1992 and 6.3 billion US
dollars in 1993 at Hong Kong before they were re-exported to the United
States. The US side, however, calculated the added value created in Hong
Kong region's entrepot trade as imports from China, and thus greatly
over-calculated its import value from China.
Secondly, the US statistics of its exports to China has been
under-estimated by neglecting re-exports. According to analyses by
experts of the Sino-US Joint Commission on Commerce and Trade, the amount
of re-exports to China via the Hong Kong region included in the US
statistics of its exports to China was only about a quarter of that
included in Hong Kong's statistics. In 1992 and 1993 respectively, about
1.8 billion US dollars and 2.3 billion US dollars worth of US exports to
China, through entrepot trade via Hong Kong, were not included in the US
statistics of its exports to China.
Thirdly, the US method in determining the origin of goods also leads to
the discrepancies in the statistics of the two sides. The judgment of the
origin of ordinary imported goods is usually based on the declaration by
importers. Goods determined as originating in China are recorded as
imports from China, regardless of whether they are actually exports via a
third place or whether the goods have acquired added value in that third
place. Some imports which have been recorded by the United States as
imports from China should, most probably, be recorded as imports from
other third countries or regions. Experts of both sides acknowledged that
further studies are needed on the issue of determination of origin.
Leaving aside the error caused by the rules of origin, the US statistics
over-estimated trade deficit against China by 7 billion US dollars in
1992 and 8.6 billion US dollars in 1993, or the published US trade
deficits against China in these two years were exaggerated by more than
60% (see Table 2), merely through neglecting entrepot trade and value
added from entrepot trade alone.
Table 2 The United States' Over-estimated Trade Deficit
against China as the Result of Neglecting Re-exports
and Added Value from Re-exports via the Hong Kong Region
(in billions of US dollars)
1992 1993
US published imports from China 25.73 31.54
Value added via Hong Kong's re-exports -5.23 -6.3
Adjusted US imports 20.5 25.24
US published exports to China 7.42 8.77
US and Hong Kong statistic difference
over re-exports via Hong Kong 1.8 2.3
Adjusted US exports 9.22 11.07
US published deficit against China 18.31 22.77
Adjusted US deficit 11.28 14.17
Data source: Work report of the Trade Statistics
Subgroup of the Trade and Investment Working Group of
the Sino-US Joint Commission on Commerce and Trade
In addition, the United States has also under-estimated its export value
to China because of its incomplete export statistics. On December 5,
1996, officials with the Census Bureau of the US Department of Commerce
pointed out in the Business Journal that at least 10% of US exports might
have been overlooked in statistics because exports, unlike imports, are
not taxed and do not bring the government any direct revenue. According
to such estimate, at least 1 billion US dollars of US exports to China
might have been left out in the US statistics in 1992 and 1993
respectively.
Considering the aforementioned factors, the US trade deficit against
China was over-estimated by 8 billion US dollars in 1992 and 9.6 billion
US dollars in 1993, and that represents an average over-estimation rate
of about 70%. The trade statistics expert group was only in charge of
investigating and analyzing the difference between the trade statistics
published by China and the United States. The trade statistics methods
adopted by the two sides have not been correspondingly adjusted, and the
US side's over-estimation of its trade deficit against China has not
since changed substantially. Calculated by the aforesaid rate, the 1996
US trade deficit against China, as published by the US side, was
over-estimated by an amount of some 16 billion US dollars.
The so-called enormous trade deficit against China under the US
statistics in recent years is attributable to a variety of factors,
including flaws in statistical techniques and methods as well as the US
policies to China. Therefore, it is far from being sufficient to evaluate
the two nations' trade balance situation only on the basis of the trade
statistics of the US side. Fundamentally, the protracted US trade deficit
against other countries is determined by its own deep-rooted economic
factors. It should not shift the blame upon other countries.
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