The China–United States Bilateral Trade Balance: How Big Is It Really?

Abstract

There are huge discrepancies between the official Chinese and US estimates of the bilateral trade balance. The discrepancies are caused by different treatments accorded to re‐exports through Hong Kong, re‐export markups, and trade in services. Deficit‐shifting between China, on the one hand, and Hong Kong and Taiwan, on the other, owing to direct investment in China from Taiwan and Hong Kong, is partly responsible for the growth in the China–US bilateral trade deficit. The 1995 China–US bilateral balance of trade in goods and services, adjusted by both re‐exports and re‐export markups, may be estimated as US$23.3 billion, a large deficit but considerably smaller than the often‐cited official US figure of US$33.8 billion.

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