Order Code RL31403
CRS Report for Congress
Received through the CRS Web
China’s Trade with the
United States and the World
Updated January 23, 2006
Thomas Lum
Specialist in Asian Affairs
Foreign Affairs, Defense, and Trade Division
Dick K. Nanto
Specialist in Industry and Trade
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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China’s Trade with the United States and the World
Summary
As imports from the People’s Republic of China (PRC) have surged in recent
years, posing a threat to some U.S. industries and manufacturing employment,
Congress has begun to focus on not only access to the Chinese market and
intellectual property rights (IPO) protection, but also the mounting U.S. trade deficit
with China as well as allegations that China is selling its products on the international
market at below cost (dumping), engaging in “currency manipulation,” and exploiting
its workers. Members of the 109th Congress have introduced several bills that would
impose trade sanctions on China for not revaluing its currency or for engaging in
other acts of unfair trade, while the Bush Administration has imposed anti-dumping
duties and safeguards against some PRC products and pressured China to revalue its
currency and remove non-tariff trade barriers.
China runs a trade surplus with the world’s three major economic centers — the
United States, the European Union, and Japan. Since 2000, the United States has
incurred its largest bilateral trade deficit with China ($162 billion in 2004). In 2003,
China replaced Mexico as the second largest source of imports for the United States
(worth $196 billion in 2004). China’s share of U.S. imports was 13% in 2004,
although this proportion still falls short of Japan’s 18% of the early 1990s. The
United States is China’s largest overseas market and second largest source of foreign
direct investment on a cumulative basis. U.S. exports to China have been growing
rapidly, although from a low base. In 2004, China replaced Germany and the United
Kingdom to become the fourth largest market for U.S. goods.
In the past decade, the most dramatic increases in exports from China to the
United States have not been in labor-intensive sectors but in advanced technology
sectors, such as office and data processing machines, telecommunications and sound
equipment, and electrical machinery and appliances. China’s exports to the United
States are taking market share from other Pacific Rim countries; however, in absolute
terms, exports from all East Asian countries have continued to grow.
China is purchasing heavily from its Asian trading partners — particularly
machinery, electronic components, and raw materials for manufacturing. China is
running trade deficits with Taiwan and South Korea and has become a major buyer
of goods from Japan and Southeast Asia. In 2004, China replaced the United States
to become Japan’s largest trading partner.
This report provides a quantitative framework for policy considerations dealing
with U.S. trade with China. It provides basic data and analysis of China’s
international trade with the United States and other countries. Since Chinese data
differ considerably from those of its trading partners (because of how entrepot trade
through Hong Kong is counted), data from both PRC sources and those of its trading
partners are presented. Charts showing import trends by sector for the United States
highlight China’s growing market shares in many industries and also show import
shares for Japan, Canada, Mexico, the European Union, and the Association for
Southeast Asian Nations (ASEAN). This report will be updated bi-annually.

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Contents
The Rationale for U.S. Policy and Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trade Policy Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Trade Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
China’s Trade Balance and Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
China and the Asia Pacific Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
China’s Trade with the United States, Europe, and Japan . . . . . . . . . . . . . . . . . . 13
U.S. Merchandise Trade Balances with Major Trading Partners . . . . . . . . . . . . . 15
U.S. Trade with China by Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
U.S. Exports to China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
U.S. Imports from China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
U.S. Imports From China — Sector Charts and Data . . . . . . . . . . . . . . . . . . . . . 22
Iron and Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Specialized Industrial Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Office Machines and Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Telecommunications and Sound Equipment . . . . . . . . . . . . . . . . . . . . 26
Electrical Machinery and Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Road Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Building and Lighting Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Travel Goods and Handbags . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Apparel and Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Footwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Professional, Scientific, and Controlling Instruments . . . . . . . . . . . . . 36
Photographic and Optical Equipment and Timepieces . . . . . . . . . . . . 37
Foreign Direct Investment in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
List of Figures
Figure 1. China’s Exports, Imports, and Balance of Merchandise Trade,
1983-2004 (PRC data) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 2. China’s Net Imports of Crude Oil, Copper, and Soybeans as a
Percent of World Trade in the Commodity . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 3. Shares (Percentages ) of U.S. Imports by Country and Country
Group, 1990 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Figure 4. U.S. Exports, Imports, and Balance of Trade with China,
1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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Figure 5. Japan’s Merchandise Imports, Exports, and Balance of Trade with
China, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Figure 6. European Union Merchandise Imports, Exports, and Balance of
Trade with China, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Figure 7. U.S. Merchandise Trade Balances with Selected Countries in
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Figure 8. Top Six Imports from China by Industry, 1993-2004 . . . . . . . . . . . . . 18
Figure 9. U.S. Imports of Iron and Steel Products (SITC 67) by Country and
Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Figure 10. U.S. Imports of Specialized Industrial Machinery (SITC 72) by
Country and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 11. U.S. Imports of Office Machines and Automatic Data
Processing Machines (SITC 75) by Country and Group, 1990-2004 . . . . . 25
Figure 12. U.S. Imports of Telecommunications and Sound Equipment
(SITC 76) by Country and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . 26
Figure 13. U.S. Imports of Electrical Machinery and Parts (SITC 77) by
Country and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Figure 14. U.S. Imports of Road Motor Vehicles (SITC 78) by Country
and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Figure 15. U.S. Imports of Building and Lighting Products (SITC 81) by
Country and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Figure 16. U.S. Imports of Furniture and Parts (SITC 82) by Country and
Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Figure 17. U.S. Imports of Travel Goods, Handbags, and Similar Products
(SITC 83) by Country and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . 32
Figure 18. U.S. Imports of Apparel and Clothing Accessories (SITC 84) by
Country and Group, 1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Figure 19. U.S. Imports of Footwear (SITC 85) by Country and Group,
1990-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Figure 20. U.S. Imports of Professional, Scientific, and Controlling
Instruments (SITC 87) by Country and Group, 1990-2004 . . . . . . . . . . . . . 36
Figure 21. U.S. Imports of Photographic Equipment, Optical Goods,
Watches and Clocks (SITC 88) by Country and Group, 1990-2004 . . . . . . 37
List of Tables
Table 1. China’s Imports by Major Commodity, 1998-2004 . . . . . . . . . . . . . . . 10
Table 2. Top Twenty U.S. Exports to China, 1996-2004 . . . . . . . . . . . . . . . . . . 17
Table 3. Top Twenty U.S. Imports from China, 1996-2004 . . . . . . . . . . . . . . . . 19
Table 4. U.S. Balance of Trade with China by Sector, 2002-2004 . . . . . . . . . . . 21
Table 5. U.S. Imports of Iron and Steel Products (SITC 67) from Selected
Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . 23
Table 6. U.S. Imports of Specialized Industrial Machinery (SITC 72) from
Selected Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . 24
Table 7. U.S. Imports of Office Machines and Automatic Data Processing
Machines (SITC 75) from Selected Countries and Country Groups,
1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table 8. U.S. Imports of Telecommunications and Sound Equipment
(SITC 76) from Selected Countries and Country Groups,
1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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Table 9. U.S. Imports of Electrical Machinery and Parts
(SITC 77) from Selected Countries and Country Groups,
1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 10. U.S. Imports of Road Motor Vehicles (SITC 78) from Selected
Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . 29
Table 11. U.S. Imports of Prefabricated Buildings, Sanitary, Plumbing,
Heating and Lighting Fixtures and Fittings (SITC 81) from Selected
Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . 30
Table 12. U.S. Imports of Furniture and Parts (SITC 82) from Selected
Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . 31
Table 13. U.S. Imports of Travel Goods, Handbags, (SITC 83) from
Selected Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . 32
Table 14. U.S. Imports of Apparel and Clothing Accessories (SITC 84)
from Selected Countries and Country Groups, 1990, 2000-2004 . . . . . . . . 34
Table 15. U.S. Imports of Footwear (SITC 85) from Selected Countries and
Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table 16. U.S. Imports of Professional, Scientific and Controlling
Instruments and Apparatus (SITC 87) from Selected Countries and
Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table 17. U.S. Imports of Photographic Apparatus, Equipment and
Supplies and Optical Goods; Watches and Clocks (SITC 88) from
Selected Countries and Country Groups, 1990, 2000-2004 . . . . . . . . . . . . . 37
Table 18. China’s Utilized Foreign Direct Investment Inflows, Top
Foreign Investors, 2000-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Table A1. China’s Merchandise Trade with the World, 1983-2004 . . . . . . . . . . 39
Table A2. U.S. Merchandise Trade with China and China’s Merchandise
Trade with the United States, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Table A3. Japan’s Merchandise Trade with China and China’s Merchandise
Trade With Japan, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table A4. European Merchandise Trade with China and China’s Merchandise
Trade with the European Union, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . 42
Table A5. Major Country Merchandise Exports to China, Imports from
China, and Trade Balances with China, 2003 and 2004 . . . . . . . . . . . . . 43
Table A6. U.S. Merchandise Trade Balances with Selected Asian
Developing Nations, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

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China’s Trade with the United States
and the World
U.S. trade with the People’s Republic of China (PRC) has raised several policy
concerns. The trade is highly unbalanced in China’s favor with a U.S. deficit of $162
billion in 2004. By November, the 2005 U.S. trade deficit with China had already
reached $185.3 billion. Many associate this deficit with the concomitant loss of
American jobs in industries competing with rapidly rising imports from China. Some
policymakers as well as leaders of industry and labor blame China for unfair trade
practices, including deliberately undervaluing its currency, which they claim create
an uneven playing field for U.S. companies when competing against imports from
the PRC. U.S.-China trade issues are often driven by larger policy objectives. U.S.
trade with China is but one aspect of the overall U.S. policy of engagement with the
PRC, a policy that serves broader U.S. interests. Trade also underpins Beijing’s
development strategy and contributes to the legitimacy of the socialist government.
This report presents data and analysis of China’s trade that shed light on various
policy issues, provides an overview of recent U.S. legislative initiatives, and
examines the goals and constraints of U.S. trade policy toward the PRC. Some of the
specific questions addressed are how the U.S. trade balance with China compares
with those of the European Union and Japan, whether imports from China are merely
replacing imports from other Pacific Rim nations, and how imports from China by
industry compare with imports from other countries.
The Rationale for U.S. Policy and Initiatives

The National Security Strategy of the United States touches on trade with the
PRC mainly through the broadly stated goal of igniting a “new era of global
economic growth through free markets and trade.” Allowing trade with China to
develop is part of the overall U.S. strategy of engagement with the PRC. The
rationale behind engagement is that working with China through economic,
diplomatic, informational, and military interchanges helps the United States to
achieve important national security goals such as preventing a nuclear war, defeating
global terrorism, defusing regional conflicts, and championing aspirations for human

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dignity.1 These goals are aimed at achieving U.S. national interests of security and
prosperity for all Americans and projecting U.S. values abroad.
U.S. trade policy toward China is based upon the assumption that trade between
the two countries has both economic and political benefits: (1) in general, trade with
China benefits both sides and allows for a more efficient allocation of available
resources; (2) the rapidly developing Chinese economy affords a rare opportunity for
U.S. businesses to embed themselves on the ground floor of a huge expanding
market; (3) China’s membership in the World Trade Organization (WTO) compels
the PRC to comply with international trading rules and spurs the development of
market forces in the country; and (4) foreign trade and investment create a
dependency on exports, imports, and foreign investment and other interaction with
the outside world in China, which in turn strengthen relations with the Western
world, create centers of power outside the Chinese Communist Party, and foster
economic and social pressures for democracy; (5) a country as significant as China
— accounting for a quarter of the world’s population, armed with nuclear weapons,
and a member of the U.N. Security Council — cannot be ignored or isolated.
According to some experts, globalization and economic interests may be exerting a
moderating influence on Beijing’s policies toward protecting China’s national
security interests. However, the Chinese Communist Party’s determination to
maintain political legitimacy through economic growth also creates tensions with
other countries and with emerging non-Party political actors.
The possible problems raised by the U.S. strategy of economic engagement with
China include (1) China has a poor record of adopting or enforcing internationally
recognized standards for working conditions and environmental regulation — a
situation that arguably may provide its businesses with an unfair competitive
advantage; (2) imports from China may be dumped, subsidized, or unfairly aided by
government entities in China, which still wield considerable influence in the
economy;2 (3) imports from China may be entering in such increased quantities that
they are a substantial cause of serious injury, or threat thereof, to competing U.S.
industries;3 (4) according to some economists and many policymakers, the U.S. trade
deficit with the PRC stems in large part from Beijing’s policy of maintaining an
undervalued currency; and (5) U.S. economic engagement with China arguably
contributes to the legitimacy of the socialist government and the strengthening
China’s military by facilitating general economic development.
U.S. trade law and WTO regulations can deal with unfair trade practices and
injury from imports (listed in items 2 and 3 above). Trade disputes with China would
normally be first discussed bilaterally before taking the case to the WTO for dispute
1 The White House, The National Security Strategy of the United States of America.
(September 2002), available at [http://www.whitehouse.gov/nsc/nss.pdf].
2 Unfair competition includes dumping (sales in the United States of an imported product
at less than fair value), countervailable subsidies (excessive government subsidies of
exporting industries) (see Subtitles A and B of Title VII of the Tariff Act of 1930, as added
by the Trade Agreements Act of 1979 (19 U.S.C. §§ 1673 et seq.), and imports that infringe
on intellectual property rights (see Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337).
3 See Sections 201 to 204 of the Trade Act of 1974 (19 U.S.C. §§ 2251-2254).

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CRS-3
resolution. Item 1, China’s violation of international labor and environmental
standards as well as its own laws and government regulations, has fewer institutional
remedies for the United States. Policy options include working to improve China’s
compliance through bilateral consultations and technical assistance, international
organizations (such as the International Labor Organization), non-governmental
organizations, multilateral treaties (such as the U.N. Framework Convention on
Climate Change and Kyoto Protocol),4 and the threat of trade sanctions.
Trade Policy Developments
In the past two years, the United States and China have taken some actions in
response to many U.S. complaints about China’s “unfair trade practices.”5
! On January 13, 2006, the Bush Administration announced that it
would apply the so-called military catch-all rule to items on the
Commodity Control List which could require licenses for the export
of items to China that could be used to strengthen China’s military
power.
! On November 8, 2005, the USTR announced that the United States
and China had, after three months of intense negotiations, reached
a broad agreement on textile trade. The Agreement lasts through the
life of the China WTO Textile Safeguard (through 2008), covers
more than 30 individual products, and contains quotas that begin at
low levels.6
! On July 21, 2005, the Chinese government announced that the value
of its currency would be revalued to 8.11 yuan per dollar and its
future value would be “referenced” to a basket of currencies. The
currency can fluctuate against the dollar by 0.3% per day. However,
China’s central bank continues to intervene in the currency market
in order to maintain a stable exchange rate.
! In May 2005, the Bush Administration imposed “safeguard” quotas
on 16 categories of Chinese apparel in response to a surge in such
imports following the lifting of textiles and apparel quotas
worldwide in January 2005.
4 See CRS Issue Brief IB89005, Global Climate Change, by John R. Justus and Susan R.
Fletcher.
5 For further discussion of U.S. trade, U.S. -China trade, and U.S. trade policies toward
China, see CRS Issue Brief IB96038, U.S. International Trade: Data and Forecasts, by
Dick Nanto and Thomas Lum; CRS Issue Brief IB91121, China-U.S. Trade Issues, by
Wayne Morrison; CRS Report RS20139, China and the World Trade Organization, by
Wayne Morrison; and CRS Report RL32165, China’s Exchange Rate Peg: Economic Issues
and Options for U.S. Policy, by Wayne Morrison and Marc Labonte.
6 Office of the United States Trade Representative. USTR Portman Announces US-China
Broad Textile Agreement. USTR Press Release, November 8, 2005.

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! In December 2004, the U.S. government imposed anti-dumping
duties on imported Chinese bedroom furniture. This case, the largest
anti-dumping action against China, reportedly has both supporters
and opponents in the U.S. furniture industry.7
! In September 2004, the U.S. government rejected a Section 301
complaint filed by the China Currency Coalition alleging that
China’s fixed exchange rate constituted currency manipulation. In
November 2004, the Administration rejected a similar petition filed
by Members of Congress, while continuing to press and advise
China on revaluing or floating its currency.
! In April 2004, the Bush Administration rejected a Section 301
petition filed by the AFL-CIO alleging unfair trade practices based
upon exploitation of labor in the PRC and calling for a tariff of up
to 77% on goods imported from China.
! In March 2004, the Bush Administration filed the United States’ first
complaint against China under the WTO’s dispute settlement
mechanism, charging that the PRC unfairly taxed imported
semiconductors.8 In July 2004, China eliminated the tax breaks for
domestically-produced semi-conductors.
Members of the 109th Congress have introduced several bills aimed at helping
to reduce the U.S. trade imbalance with China. These bills address issues such as
China’s currency practices; other alleged unfair trade practices, such as dumping and
export subsidies; violation of intellectual property rights; non-compliance with WTO
regulations; maintaining U.S. technology leadership; and withdrawing NTR status
from the PRC. The following are selected bills affecting U.S.-China trade:9
! H.Con.Res. 33 (Ryan: Introduced January 26, 2005.) Urging the
President to take immediate steps to establish a plan to adopt the
recommendations of the United States-China Economic and Security
Review Commission in its 2004 Report to the Congress in order to
correct the current imbalance in the bilateral trade and economic
relationship between the United States and China.
! S. 295 (Schumer/Graham: Introduced February 3, 2005) To
authorize the imposition of a 27.5% tariff on goods imported from
China unless the President certifies that China has made a good faith
effort to revalue its currency to reflect its fair market value. This
bill, which in April 2005 had the support of 67 senators, is expected
7 Doug Palmer, “U.S. Sets Duty of up to 198 Pct on Chinese Furniture,” Reuters News,
November 9, 2004.
8 Chris Buckley, “China on Unfamiliar Ground in Trade Fight with U.S.,” New York Times,
March 23, 2004.
9 For bill status and further policy analysis, see CRS Issue Brief IB91121, China-U.S. Trade
Issues, by Wayne M. Morrison.

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CRS-5
to be voted on in October 2005. Related bills: S. 14 (Stabenow),
H.R. 1575 (Myrick), S.Amdt. 309 (Schumer) to S. 600.
! H.R. 728 (Sanders: Introduced February 9, 2005) To withdraw
normal trade relations treatment from the products of the People’s
Republic of China.
! S. 377 (Lieberman: Introduced February 15, 2005) To require
negotiation and appropriate action with respect to certain countries
that engage in currency manipulation.
! H.R. 3283 (English: Introduced July 14, 2005) Amends the Tariff
Act of 1930 to impose countervailing duties on certain merchandise
from nonmarket economy countries. Passed in the House on July
27, 2005. Related bill: S. 1421 (Collins).
Summary of Trade Data
What light do the trade data shed on the controversy over economic relations
with China? First, China is a new trading powerhouse that has burst onto the U.S.
trading scene in recent years. In 2003, the PRC surpassed Japan to become
America’s third largest trading partner, while the United States was the PRC’s
second largest trading partner and largest export market. In 2005, U.S. imports from
China exceeded those from Mexico, and China’s total trade with the United States
nearly exceeded that of Mexico. The expanded European Union (25 nations)
reportedly became China’s largest trading partner in 2004.10 Although China is a
new player in international trade, it is taking major shares of markets once dominated
either by other countries or domestic U.S. industries.
China is the second largest source of U.S. imports of merchandise ($196 billion
in 2004) after Canada ($255 billion). PRC imports surpassed those of Mexico in
2003 and of Japan in 2002. China now accounts for over 13% of U.S. imports
(2004), up from 12% in 2003, 8% in 1999, and 3% in 1990, although this share falls
short of Japan’s 18% in the early 1990s. In 2004, the United States was China’s
largest overseas market, followed by the EU-25 (with $158.5 billion in imports from
China) and Japan (with $94.4 billion in such imports).
Second, the data show that while U.S. trade with China is unbalanced, the same
is also true for Europe and Japan, although to a lesser extent. China runs a trade
surplus with the world’s three major economic centers. The U.S. bilateral deficit in
2004 ($162 billion), however, was nearly twice as large as that of the EU-15 ($89.3
billion, the EU-25 deficit was $99.3 billion) and over eight times that of Japan ($20.5
billion). (As reported by the United States, EU, and Japan.)
10 “EU Becomes China’s Biggest Trading Partner — USDA Attache,” Reuters News,
February 25, 2005.

---

CRS-6
Third, the data show that the U.S. trade deficit with China is rising with the
overall U.S. trade deficit or growing at a slightly faster rate. Between 1996 and 1998,
China’s share of the overall U.S. merchandise trade deficit averaged 24%; between
1999 and 2001, China’s share was 18%, and between 2002 and 2004, 22%. Over the
same period, the shares of the U.S. deficit in goods trade accounted for by Japan, the
Association of Southeast Asian Nations (ASEAN), and the East Asian newly
industrialized countries (NICs) have decreased while that with the European Union
has increased.
Fourth, the data show that U.S. exports to China are growing faster than U.S.
exports to other nations. U.S. exports to China (up 159% between 1999 and 2004)
have grown faster than U.S. exports to Canada (up 12% over the same period),
Mexico (14%), and Japan (-7%), although China’s imports have grown from a low
base.11 In 2004, China replaced Germany and the United Kingdom to become the 4th
largest market for U.S. goods, moving up from 11th place in 1999. The United States
exported slightly more to China ($32.6 billion) than it did to the United Kingdom
($31.7 billion) in 2004. According to Japanese, European, and Korean data, in 2004,
Japan was the largest overseas supplier of products to China with $73.9 billion in
exports. The EU-15 and South Korea were the second and third largest exporters to
China in 2004 with $57.7 billion and $54.9 billion in exports, respectively.12
Fifth, the U.S. industrial sectors most at risk from import competition from
China are generally labor intensive, but China is moving quickly up the technology
ladder. The sectors in which the United States runs the largest trade deficits are
generally those that depend on abundant and low-cost labor, while the United States
accrues surpluses with China in some advanced technology items, such as aircraft,
and in some agricultural products. In China’s trade with the developed countries,
over two-thirds of its exports are “low-end manufactures” — appliances, toys,
furniture, footwear, apparel, and plastic goods — while 85% of its imports are
capital-intensive machinery and equipment, electronic goods, and natural resource-
related products.13
The United States has incurred large trade deficits with China in some high
value-added sectors as well. These sectors include office and data processing
machines, telecommunications and sound equipment, and electrical machinery and
appliances. Some of China’s competitiveness in these sectors may be based upon its
underlying economic advantages combined with foreign technology and
manufacturing processes, but in other areas, Chinese surpluses may be based largely
upon import restrictions. In 2003, China became the third largest car market and the
fourth largest maker of automobiles with an output of 4.4 million vehicles.
11 U.S. Department of Commerce, International Trade Commission.
12 Global Trade Atlas; “Economy Increasingly Dependent on Mainland Ties,” Nikkei
Weekly, June 14, 2004.
13 Jonathan Anderson, “China, Asia’s Paper Tiger?” The Asian Wall Street Journal, August
15, 2002.

---

CRS-7
Production of cars is expected to reach 5.6 million units in 2005. However, China
is not a major global importer or exporter of cars.14
Sixth, PRC data show much smaller bilateral trade deficits than those claimed
by its trading partners. PRC trade data differ from U.S. data primarily because of the
treatment of products from or to China (mainland) that pass through the Hong Kong
Special Administrative Region (SAR). Other reasons include different accounting
systems and a lack of transparency in China’s data reporting. China counts Hong
Kong as the destination of its exports sent there, even goods that are then
transshipped to other markets. By contrast, the United States and many of China’s
other trading partners count Chinese exports that are transshipped through Hong
Kong as products from China,15 not Hong Kong, including goods that contain Hong
Kong components or involve final assembly or processing in Hong Kong.
Furthermore, the United States counts Hong Kong as the destination of U.S. products
sent there, even those that are then re-exported to China. However, the PRC counts
many of such re-exported goods as U.S. exports to China. Some analysts argue that
the U.S. Department of Commerce overstates the U.S. trade deficit with China by as
much as 21% because of the way that it calculates entrepot trade through Hong
Kong.16
According to PRC data, China’s trade surplus with the United States in 2004
was $80.3 billion — not $162 billion as reported by the United States government.
In Japan’s case, both countries claim to be running trade deficits with each other.
According to Chinese data, the country is running trade deficits with Taiwan ($51.2
billion in 2004), South Korea ($34.2 billion), Japan ($20.7 billion), Malaysia ($10
billion), Germany ($6.3 billion), Thailand ($5.7 billion), Brazil ($5 billion), the
Philippines ($4.8 billion), Saudi Arabia ($4.8 billion), and Russia ($3 billion).17
Seventh, some trade specialists suggest that the surge of U.S. imports from
China do not pose an additional threat to U.S. industries and workers because it
merely represents a shift of investment and production from other Pacific Rim
countries. China’s share of U.S. imports has been rising while that from other Pacific
Rim nations has been falling. Looking only at import shares, however, does not tell
the whole story. Although changes in shares may be offsetting, the absolute values
of U.S. imports from all major Pacific Rim countries and regions have been rising.
Eighth, the rapid growth of the Chinese economy is adding to world demand for
basic commodities that is causing upward pressure on world prices. Particularly
significant are Chinese net imports of crude oil, copper, and soybeans.
14 China Online, February 2, 2004; Xinhua News Agency, April 11, 2005.
15 According to the Hong Kong Trade Development Council, 55% of Hong Kong’s total
exports involve re-exports of Chinese (mainland) goods to markets other than China.
16 U.S.-China Business Council, “Understanding the U.S.-China Balance of Trade,” May
2003.
17 Global Trade Atlas.

---

CRS-8
China’s Trade Balance and Imports
As shown in Figure 1 and Appendix Table A1, according to PRC data, with
the exception of 1993, China has run a global trade surplus in goods each year since
1990. That surplus emerged at the beginning of the 1990s, changed to a $11 billion
deficit in 1993 (when the government temporarily loosened controls on imports), and
reached a peak of $43.3 billion in 1998 before declining to $22.6 billion in 2001. In
2004, China’s global trade surplus was $32.8 billion (PRC data).
Figure 1. China’s Exports, Imports, and Balance of Merchandise
Trade, 1983-2004 (PRC data)
$Billions
700
600
500
400
Exports
300
200
Balance
Imports
100
0
-100
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4
Year
Sources: PRC General Administration of Customs; Global Trade Atlas (PRC
data).
Between 1995 and 2001, China’s current account surplus (includes trade in
goods, services, and unilateral transfers such as remittances and government to
government payments) was smaller than its surplus in merchandise trade because of
a deficit in its services trade. The current account surplus exceeded the merchandise
trade surplus in 2002 and 2003 due to large increases in services exports and
remittances. In 2004, the current account surplus was $70 billion compared to the
merchandise trade surplus of $32.6 billion. According to one projection, China’s
global current account balance will begin to decline in 2006 and enter into deficit in
2010, while China’s trade surplus will reach a plateau in 2006 and begin to decline
in 2010.18
As mentioned in the previous section, PRC data show much smaller bilateral
trade deficits than those claimed by its trading partners. In 2004, the United States
18 Global Insight, “International Analysis — China,” August 2005.

---

CRS-9
claimed it had incurred a $161.9 billion trade deficit with China, while China
reported a trade surplus of only $80 billion with the United States. Japan reported
a $20.4 billion merchandise trade deficit with China, while China likewise claimed
a $20.6 billion trade deficit with Japan. In 2004, the European Union’s trade deficit
with China ($89 billion) was only $36 billion according to Chinese data (excluding
Hong Kong). In 2004, the 156 countries categorized as the “world” by the
International Monetary Fund reported an aggregate trade deficit with China of $267
billion. This is approximately 6.5 times the $41 billion total merchandise trade
deficit reported by China for that year (excluding Hong Kong).19 (See Appendix
Tables A1-A5.)
Not only have the surge in imports from China disrupted U.S. markets, but
China has become a major importer of world commodities or primary goods. Table
1 shows China’s imports by major commodity. Imports of machinery (including
electrical) have soared from a total of $46.8 billion in 1997 to $233.6 billion in 2004.
Such an increase in demand for machinery, however, has only a moderate effect on
overall prices. China’s imports of mineral fuel, organic chemicals, iron and steel,
ores, cotton, and wood, however, can affect world prices, particularly when combined
with rising world demand or tightening supplies. In 2004, Chinese demand for
mineral fuel, in particular, including crude petroleum ($48 billion in imports), added
to upward world price pressures. As shown in Figure 2, China’s net imports of
crude oil switched from negative (net exports) in 1995 to nearly 5% of world imports
in 2002. Global demand for oil is expected to increase by 40% in the next two
decades, and much of that increase is expected to come from China, whose energy
needs are projected to double by 2020.20 Net imports of copper and soybeans,
likewise, rose from virtually zero in 1990 to 15% and 20% in 2002 for copper and
soybeans, respectively.21
19 U.S. Department of Commerce, International Trade Commission; Global Trade Atlas;
International Monetary Fund, Direction of Trade Statistics Quarterly, June 2005.
20 Kris Axtman, “Oil’s New High May Persist,” The Christian Science Monitor, August 19,
2004, p. 1.
21 International Monetary Fund, World Economic Outlook, April 2004, pp. 84-85.

---

CRS-10
Table 1. China’s Imports by Major Commodity, 1998-2004
(billions of dollars)
1998
1999
2000
2001
2002
2003
2004
Electrical Machinery
26.4
35.3
50.7
55.9
73.3
104.0
142.1
Machinery
24.7
27.8
34.4
40.6
52.2
71.6
91.5
Mineral Fuel, Oil, etc.
6.7
8.9
20.7
17.5
19.3
29.3
48.0
Optics, Medical. Instr.
4.0
5.0
7.3
9.8
13.5
25.1
40.1
Plastic
10.5
11.6
14.5
15.3
17.4
21.0
28.0
Organic Chemicals
3.5
5.5
8.3
9.0
11.2
16.0
23.8
Iron and Steel
5.8
7.2
9.6
10.9
13.2
22.2
23.6
Ores, Slag, Ash
2.3
2.2
3.1
4.2
4.3
7.2
17.3
Vehicles, Not Railway
2.0
2.4
3.6
4.5
6.5
11.8
12.9
Copper & Articles Thereof
2.2
3.1
4.7
4.9
5.7
7.2
10.5
Misc. Grain, Seeds, Fruit
1.3
1.6
3.1
3.3
2.8
5.7
7.3
Cotton and Yarn, Fabric
2.6
2.4
2.8
2.9
3.3
4.7
6.9
Wood
2.0
2.9
3.7
3.5
4.1
4.6
5.2
Misc. Chemical Products
1.6
2.2
2.5
2.6
3.8
4.9
5.1
Aircraft, Spacecraft
3.2
3.2
2.2
4.4
4.1
4.5
4.9
Paper, Paperboard
3.6
4.0
4.0
3.6
4.1
4.4
4.6
Source: World Trade Atlas using Chinese data.
Figure 2. China’s Net Imports of Crude Oil, Copper, and Soybeans
as a Percent of World Trade in the Commodity

---

CRS-11
China and the Asia Pacific Region
While China is gaining manufacturing prowess and its trade surplus with the
United States is spiraling, the country is purchasing heavily from neighboring trade
partners. In 2004, China’s imports rose by 35%, including machinery, raw materials,
and components for manufacturing.22 In addition, the bulk of China’s exports are
manufactured under foreign brand names, and over half of China’s exports are
produced by foreign-owned companies. According to PRC official estimates, 70%
of PRC exports to the United States contain foreign components, particularly from
Taiwan, South Korea, and Singapore.23
China has become the largest trading partner of Taiwan and Japan. The PRC
has become South Korea’s largest foreign investment destination and largest export
market. According to Taiwanese and Korean data, in 2004, Taiwan’s estimated trade
surplus with China was $28 billion, while South Korea’s surplus was $25.7 billion.24
China has become a huge buyer of raw materials, agricultural commodities,
steel, industrial machinery, and electronic components from Southeast Asia, as well
as an important source of foreign investment and second largest source of foreign
tourists in the region.25 According to PRC data, China’s imports from ASEAN
countries grew by 33% in 2004 while exports surged by 38%. China sells machinery,
electronic goods, chemicals, and textiles and apparel to Southeast Asian countries.
Despite worries about economic competition, in 2004, ASEAN, which ran a trade
surplus of $20 billion with China that year (PRC data),26 agreed to establish a free
trade zone with China that would be implemented gradually over five years.27 In the
view of many of its major trading partners in Asia, China’s economic growth and
open trade policies have presented both competitive challenges and economic
opportunities. However, according to some analysts, China’s appetite for imports is
slowing, while its export production shows little sign of abating.28
22 Robert J. Samuelson, “The World’s Powerhouse,” Newsweek, May 31, 2004.
23 Taiwan’s major exports to China include telecommunications products, computers, plastic
products, steel, man-made fibers, industrial-use textiles, organic chemical products, optical
and photo-taking instruments and parts, copper products, and polyester. Hong Kong Trade
Development Council.
24 Taiwan data include Hong Kong. Directorate General of Customs, Ministry of Finance,
Republic of China; Korean International Trade Association.
25 Sadanand Dhume, “Buying Fast into Southeast Asia,” Far Eastern Economic Review,
March 28, 2002.
26 Global Trade Atlas
27 “China-ASEAN Trade Surges over 40 Percent in 2003,” Thai News Service, February 11,
2004.
28 Keith Bradsher and David Barboza, “As Exports Boom, China Risks Global Backlash,”
International Herald Tribune, April 9, 2005.

---

CRS-12
Some trade specialists suggest that the surge of U.S. imports from China do not
pose an additional threat to U.S. industries and workers because it merely represents
a shift of investment and production from other Pacific Rim countries. In other
words, expanding imports from China have been offset by declining imports from
other East Asian or Pacific Rim countries.29 These countries include those at a
similar level of development which are competing directly with China, such as
Malaysia and Thailand, and more industrialized countries or special administrative
regions that are moving their lower-end production to the PRC, such as Macao, Hong
Kong, South Korea, and Taiwan. In sectors such as handbags, footwear, building and
lighting fixtures, furniture, and apparel, U.S. imports from China have been
displacing those from other developing Asian nations as well as Hong Kong, South
Korea, Taiwan, and Mexico. As shown in Figure 3, China’s share of U.S. imports
grew from 3% in 1990 to 13% in 2004 (out of total U.S. imports of $491 billion and
$1.46 trillion, respectively), while the rest of East Asia’s (Japan, NICS, and ASEAN)
share fell from 36% to 21.6%. Mexico’s share of U.S. imports grew from 6% in
1990 to 11.6% in 2002. It fell to 10.6% in 2004. In absolute terms, however, U.S.
imports from all major Pacific Rim countries and regions rose.
Figure 3. Shares (Percentages ) of U.S. Imports by Country
and Country Group, 1990 and 2004
29 Council of Economic Advisors, Economic Report of the President, February 2004.

---

CRS-13
China’s Trade with the United States,
Europe, and Japan
As shown in Figure 4 and Appendix Table A2, by either Chinese or U.S. data,
China runs a trade surplus with the United States. Although Chinese figures show
it at only $80.3 billion in 2004, the United States reports it to be $162 billion.
According to PRC data, China has run a trade surplus with the United States since
1993. According to U.S. data, the United States has incurred trade deficits with
China since 1983.
Figure 4. U.S. Exports, Imports, and Balance of
Trade with China, 1983-2004
$Billions
300
Imports
200
(U.S. figures)
Exports
100
(U.S. figures)
0
-100
Balance
Balance
(U.S. figures)
(PRC data)
-124
-200
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4
Year
Sources: U.S. Department of Commerce
IMF. Direction of Trade Statistics Yearbook
Global Trade Atlas
As is the case with the United States, Japan has run a trade deficit with China
since 1988 (according to Japanese data). As shown in Figure 5 and in Appendix
Table A3, Japan’s balance of trade with China dropped from a surplus of $6 billion
in 1985 to a deficit of nearly $6 billion in 1990. Japan’s trade deficit with China
reached a peak of $26.5 billion in 2001. In 2004, that deficit was $20 billion.
Japan’s exports to China have grown dramatically in the past few years. Japan’s

---

CRS-14
largest exports to China are electronics, general machinery, and optical,
photographic, and medical equipment.30
30 Global Trade Atlas.

---

CRS-15
Figure 5. Japan’s Merchandise Imports, Exports, and
Balance of Trade with China, 1983-2004
$Billions
100
80
Imports
(Japan's Data)
60
Exports
(Japan's Data)
40
Balance
(China's Data)
20
0
-20
Balance
(Japan's Data)
-40
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4
Year
Sources: IMF.
Direction of Trade Statistics Quarterly

Global Trade Atlas
As shown in Figure 6 and Appendix Table A4, according to EU data, the
European Union incurred a trade deficit with China of $947 million in 1988, which
grew to $89 billion in 2004. According to Chinese figures, however, the EU trade
deficit with China began in the late 1990s and grew to only $31.8 billion in 2004.
Figure 6. European Union Merchandise Imports,
Exports, and Balance of Trade with China, 1983-
2004
$Billions
200
Imports
150
(EU/EEC Data)
100
Exports
(EU/EEC Data)
50
0
Balance
-50
(China's Data) Balance
(EU/EEC Data)
-100
83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4
Year
Note: For 1980-88, data are for the EEC12 nations. After 1988, data are for the
EU 15.
Sources: IMF. Direction of Trade Statistics Quarterly
Global Trade Atlas

---

CRS-16
Compared to the world’s two other major economic centers, the U.S. trade
deficit with China at $162 billion in 2004 was the largest, followed by that of the EU
at $89 billion and Japan at $20 billion. Within the EU, according to trading partner
data, the U.K.’s trade deficit with China was $14.8 billion, Germany’s was $12.4
billion, and France’s was $7.8 billion in 2004. As shown in Appendix Table A5,
however, China’s trade statistics indicate smaller European trade deficits or even
surpluses.
U.S. Merchandise Trade Balances with Major
Trading Partners
How does the U.S. trade deficit with China compare with the U.S. trade deficit
with other nations? In 2000, China surpassed Japan as the country with which the
United States incurs its largest trade deficit. In 2004, the largest U.S. merchandise
trade deficits were with China ($162 billion), Japan ($75 billion), Canada ($68
billion), Germany ($45.8 billion), and Mexico ($45 billion). Among Asian nations
in 2004, the United States incurred large trade deficits with South Korea ($19.8
billion), Malaysia ($17 billion), Taiwan ($12.8 billion), Thailand ($11 billion), and
Indonesia ($8 billion). (See Figure 7 and Appendix Table A6.)
The U.S. trade deficit with China is notable for not only its size but also the
large imbalance between imports from and exports to China. In 2004, Japan
exported 2.4 times more to the United States than it imported, while Canada and
Mexico exported 1.3 times and 1.4 times more, respectively, than they imported.
China, by comparison, exported 5.7 times more to the U.S. market in 2004 than it
imported from the United States. This indicates that the Chinese market has been
vastly underdeveloped as a destination for U.S. exports.

---

CRS-17
Figure 7. U.S. Merchandise Trade Balances with Selected
Countries in 2004
Country
China
-162
Japan
-75
Canada
-67
Germany
-46
Mexico
-45
Venezuela
-20
S. Korea
-20
Ireland
Deficit
-19
Italy
-17
Malyasia
-17
Saudi Arabia
-16
Nigeria
-15
Taiwan
-13
Thailand
-11
France
-11
U.K.
-10
India
-9
Sweden
-9
Russia
-9
UAR
3
Singapore
4
Belgium
4
Hong Kong
Surplus
6
Australia
7
Netherlands
12
-200
-150
-100
-50
0
50
$ Billions
Source: U.S. Department of Commerce
U.S. Trade with China by Sector
U.S. Exports to China
As shown in Table 2, among the top twenty U.S. exports to China in 2004, the
top five by dollar value were electrical machinery, oil seeds and fruits, metalliferous
ores, transport equipment, and general industrial machinery. Exports of oil seeds and
fruits and metalliferous ores have grown by over six times and seven times,
respectively, since 1999, suggesting that China’s appetite for raw materials and
agricultural commodities has grown relative to that for specialized industrial
machinery and office machines. Among the top 20 U.S. export items to China,
textile fibers have experienced the largest growth in the past five years (1,568%).
China’s top ten imports from the world in 2004 were: electrical machinery,
machinery, mineral fuel, optical and medical instruments, plastics, organic chemicals,
iron and steel, ores, vehicles, and copper articles.

---

CRS-18
Table 2. Top Twenty U.S. Exports to China, 1996-2004
(millions of dollars)
Category
1996 1997 1998 1999 2000 2001 2002 2003 2004
Electrical Mach.
583
741 1,013 1,380 1,747 2,109 2,657 3,722 4,631
Oil Seeds and Fruits
422
419
288
354 1,020 1,014
890 2,832 2,332
Metalliferous Ores
212
180
195
285
618
919
956 1,525 2,198
Transport Equip.
1,718 2,127 3,604 2,325 1,695 2,471 3,443 2,495 2,025
Gen. Ind. Mach./Equip.
775
766
674
685
838 1,080 1,145 1,404 1,912
Specialized Industrial
688
770
538
481
758
819 1,124 1,218 1,744
Machinery
Textile Fibers
888
682
199
98
154
160
278
909 1,638
Prof. & Scientific Instr.
346
429
527
538
583
886
931 1,167 1,568
Organic Chemicals
238
208
212
302
473
373
554 1,054 1,542
Office Machines
265
343
878
842 1,498 1,602 1,193 1,274 1,396
Plastics in Prim. Forms
314
340
320
394
545
628
740
931 1,342
Telecom, Sound
670
644
655
573
817 1,204 1,110
978 1,104
Recording Equip.
Power Gen. Equip.
471
603
542
505
312
507
462
640
965
Pulp and Waste Paper
187
148
156
193
276
330
414
600
753
Misc. Manufactures
349
297
247
242
384
440
509
515
647
Road Vehicles
149
348
140
192
185
223
272
506
624
Metalworking Mach.
240
173
190
162
211
265
367
304
618
Chemical Materials
93
124
143
177
247
285
312
403
582
Hides, Furskins
107
112
126
96
237
402
397
457
521
Cereals
444
46
91
51
33
26
35
44
505
Note: Ranked by data for 2004.
Source: U.S. Department of Commerce, International Trade Commission.
U.S. Imports from China
As shown in Figure 8 and Table 3, among the top twenty U.S. imports from
China in 2004 by dollar amount, the top six were office machines and automatic data
processing machines, miscellaneous manufactured articles, telecommunications and
sound equipment, electrical machinery, apparel and accessories, and footwear. The
value of U.S.-imports of PRC office and data processing machines alone ($35.5
billion) exceeded total U.S. exports to China in 2004 ($34.7 billion). While U.S.
imports in all these categories have increased, the most dramatic percentage changes
have not been in some traditional labor-intensive industries but in sectors that
encompass advanced technology, such as office and data processing machines (up

---

CRS-19
331% between 1999 and 2004), telecommunications and sound equipment (up
229%), and electrical machinery and appliances (up 116%). Other items that have
experienced large growth since 1999 are furniture (up 200%) and road vehicles (up
253%).
Figure 8. Top Six Imports from China by Industry, 1993-2004
$Billions
140
120
100
80
60
Electrical Machinery
Telecom. Equip.
Apparel
40
Office Machines
Footwear
20
Miscell. Manufactures
0
93
94
95
96
97
98
99
2000
1
2
3
4
Year
Source: U.S. Department of Commerce

---

CRS-20
Table 3. Top Twenty U.S. Imports from China, 1996-2004
(millions of dollars)
Category
1996
1997
1998
1999
2000
2001
2002
2003
2004
Office Machines, Data Processing
3,562
5,019
6,329
8,239
10,980
10,763
15,230
23,612
35,579
Misc. Manufactured Articles
11,867
14,155
15,872
17,291
19,445
19,763
23,494
26,287
29,505
Telecom and Sound Equip.
4,438
5,126
6,405
7,382
9,812
10,118
14,144
16,723
24,311
Electrical Machinery, Parts, and Appliances
3,874
4,877
5,707
7,022
9,037
9,110
10,217
11,808
15,197
Apparel and Accessories
6,298
7,406
7,133
7,351
8,473
8,866
9,538
11,341
13,567
Footwear
6,367
7,354
8,016
8,438
9,206
9,758
10,241
10,546
11,347
Furniture and Bedding
1,109
1,545
2,183
3,261
4,476
5,018
6,954
8,742
10,905
Manufactures of Metals
1,414
1,816
2,238
2,878
3,651
4,119
5,219
6,284
8,250
General Industrial Machinery
982
1,180
1,449
1,833
2,087
2,414
3,259
4,107
5,502
Textile Yarn, Fabrics
1,042
1,369
1,432
1,583
1,816
1,854
2,501
3,347
4,236
Travel Goods, Handbags
1,665
1,917
1,942
1,974
2,214
2,171
2,741
3,136
3,936
Building Fixtures/Fittings
1,013
1,194
1,444
2,073
2,555
2,377
2,962
3,199
3,697
Road Vehicles
417
574
731
923
1,800
1,406
1,796
2,369
3,267
Nonmetallic Mineral Manufactures
963
1,216
1,441
1,681
2,059
2,165
2,431
2,624
2,953
Photographic Optical Equip, Watches, Clocks
976
1,211
1,400
1,600
2,016
1,935
1,842
2,001
2,239
Professional & Scientific Instruments
524
634
715
837
1,025
1,177
1,301
1,660
2,176
Misc. Low-Valued Items
232
282
425
586
759
784
957
1,229
1,652
Cork and Wood (Non-Furniture)
255
335
445
568
710
792
990
1,162
1,612
Iron and Steel
291
314
398
349
623
439
441
490
1,610
Paper Products
267
310
401
471
611
627
792
1,022
1,258
Note: Ranked by data for 2004
Source: U.S. Department of Commerce, International Trade Commission.

---

CRS-21
Balance of Trade by Sector
In modern economies, trade by sector generally follows two patterns. The first
is based on traditional comparative advantage in which one country trades with
another in those products in which it has an abundance of resources or in which it is
comparatively productive. The United States economy is characterized by high
technology, extensive farmland with high agricultural yields, expensive labor, and
deep capital. As such, the United States would be expected to be strong in exports
of high-technology goods, food and grains, and capital intensive products. The
Chinese economy, on the other hand, is characterized by abundant and cheap labor,
low capital intensity, and a mix of low, medium and high technology both in
manufacturing and agriculture. As such, China would be expected to be strong in
exports of not only labor-intensive manufactures, such as textiles and apparel, shoes,
toys, and light manufactures, but also items produced under the tutelage of foreign
companies that have invested in Chinese factories. These could include household
appliances, electronics, tools, or automobile parts. One would expect trade that is
conducted on the basis of comparative advantage to be unbalanced on a sector-by-
sector basis. The United States, for example, would run a surplus with China in
aircraft but a deficit in apparel.
The second trade pattern occurs among industrialized countries and is called
intra-industry or trade within industrial sectors. This is typical of trade among North
America, the European Union, and industrialized nations of Asia (e.g., Japan, South
Korea, and Taiwan). The products traded usually carry brand names, are
differentiated, and may be protected by intellectual property rights. For example, the
United States both imports and exports items such as automobiles, machinery,
electronic devices, prepared food, and pharmaceuticals. A considerable share of U.S.
intra-industry trade is carried out within a multinational corporation (e.g., between
Ford Motors and one of its related companies, such as Mazda in Japan, Jaguar in the
United Kingdom, or with other subsidiaries abroad). A large deficit in an intra-
industry trading sector in which the United States is competitive indicates that the
trading partner country may be using import barriers to tip the trade balance in its
favor.
Table 4 shows the U.S. balance of trade with China by major sector. Most of
the sectors in which the United States runs the largest trade deficits with China are,
as expected, those that depend on mostly abundant and low-cost labor. These include
toys and sports equipment, furniture and bedding, footwear, textiles and apparel, and
leather goods. Among the large deficit sectors, however, are machinery and
mechanical appliances and electrical machinery. Some of China’s competitiveness
in these sectors may be based upon its underlying economic advantages combined
with foreign technology and manufacturing processes, but in other areas the
advantage may also indicate tariffs and non-tariff trade barriers. In plastic articles,
optical and medical instruments, books and magazines (indicated by shading in the
table), the United States runs a surplus in its balance of trade with the world but a
deficit with China.

---

CRS-22
Table 4. U.S. Balance of Trade with China by Sector, 2002-2004
(millions of dollars)
2002
2003
2004
Total China
-103,115
-123,960
161,977
Major U.S. Deficit Sectors (HTS
Categories)
Machinery/Mechanical Appliances
-16,105
-25,262
-37,628
Electrical Machinery
-20,453
-24,007
-34,113
Toys and Sports Equipment
-14,415
-16,070
-17,163
Furniture and Bedding
-9,842
-11,739
-14,339
Footwear
-10,191
-10,528
-11,318
Woven Apparel
-4,464
-5,484
-6,606
Leather Art; Saddlery; Bags
-4,456
-5,040
-5,708
Articles of Iron and Steel
-2,437
-3,086
-4,376
Knit Apparel
-2,613
-3,192
-4,092
Plastic Articles
-2,771
-3,032
-3,402
Misc. Textile Articles
-1,646
-2,353
-3,052
Vehicles, Not Railway
-1,656
-1,947
-2,729
Misc. Art of Base Metal
-1,256
-1,414
-1,809
Precious Stones and Metals, Pearls
-1,144
-1,391
-1,714
Optical, Medical Instruments
-1,501
-1,650
-1,704
Tools, Cutlery, of Base Metals
-1,108
-1,373
-1,554
Wood and Articles of Wood
-837
-1,019
-1,454
Miscellaneous Manufactures
-913
-1,023
-1,203
Ceramic Products
-1,025
-1,112
-1,203
Artificial Flowers, Feathers
-1,047
-1,091
-1,109
Rubber and Rubber Articles
-580
-698
-1,036
Books, Newspapers, Manuscripts
-528
-653
-892
Major U.S. Surplus Sectors (HTS
Categories)
Misc. Grain, Seed, Fruit
849
2,787
2,260
Aircraft, Spacecraft
3,374
2,388
1,870
Cotton and Cotton Fabrics
-29
587
1,260
Wood pulp, Etc.
413
599
752
Hides and Skins
427
477
527
Cereals
28
17
475
Copper and Articles Thereof
154
436
344
Fertilizers
662
401
267
Note: Categories in italics are those in which the United States runs a trade surplus with the world
but a trade deficit with China. Classification is by Harmonized System tariff codes at the 2-digit level.
Source: U.S. Department of Commerce, International Trade Commission.

---

CRS-23
The sectors in which the United States runs a trade surplus with China mirror
U.S. competitive advantages and include agricultural products, aircraft, and cotton
and cotton fabrics. In 2004, the U.S. trade surplus in cereals jumped from $17
million in 2003 to $475 million, while the surplus with China in iron and steel fell
steeply from $879 million to $45 million.
U.S. Imports From China — Sector Charts and Data
This section presents charts and data on U.S. imports from China by selected
industrial sectors. The charts show imports from China as compared with imports
from other major exporting countries or groups of countries. These include the
European Union (fifteen original countries), the Association of Southeast Asian
Nations (ASEAN, which includes, Indonesia, Malaysia, Singapore, Thailand, the
Philippines, Brunei, Vietnam, Laos, and Myanmar [Burma]), Taiwan, Mexico, South
Korea, Japan, Hong Kong, and Canada.
The data in this section are presented according to two-digit standard
international trade classification (SITC) codes as reported by the U.S. Department of
Commerce. The industries selected are those in which the share of imports from
China has risen to a significant level or trade policy has played a significant role (e.g.
iron and steel and automobiles) even though U.S. imports from China in those
industries might be small.
Iron and Steel. In iron and steel products, China is becoming a major
exporter. In 2004, China moved from seventh place in U.S. imports of iron and steel
to fifth, surpassing South Korea, Japan, and Germany. The top steel exporters to the
United States are Canada, Mexico, Brazil, Russia, and China. China’s share of U.S.
imports grew from 3.7% in 2003 to 6% in 2004. U.S. exports of iron and steel to
China include scrap metal, iron tubes and pipes, and flat-rolled stainless steel, iron,
and alloy products.

---

CRS-24
Figure 9. U.S. Imports of Iron and Steel Products (SITC 67) by
Country and Group, 1990-2004
$Billions
30
25
20
Rest of
World
15
EU15
ASEAN
10
Taiwan
Mexico
S. Korea
Japan
5
China
6%
Canada
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 5. U.S. Imports of Iron and Steel Products (SITC 67) from
Selected Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
EU15
3,303
4,379
3,637
3,041
2,621
4,697
Canada
1,504
2,803
2,437
2,981
2,885
3,979
Mexico
357
1,267
1,021
1,340
1,334
2,530
China
71
623
439
441
490
1,610
Japan
2,097
1,320
1,213
991
799
1,072
Korea
574
1,019
815
687
505
1,031
Taiwan
154
649
346
290
219
803
ASEAN
65
389
191
193
161
395
Hong Kong
2
2
2
3
2
3
Rest of World
1,691
5,293
3,657
4,469
3,929
10,204
World
9,818
17,744
13,758
14,436
12,945
26,324
Source: U.S. Department of Commerce

---

CRS-25
Specialized Industrial Machinery. China is becoming an important
supplier of specialized industrial machinery, which includes machine tools and
sewing machines, but lags behind the European Union, Japan, and Canada and
competes with other newly industrialized countries such as Mexico, South Korea,
and Taiwan. China accounted for only 4% of U.S. imports in this category in 2004.
Figure 10. U.S. Imports of Specialized Industrial Machinery (SITC
72) by Country and Group, 1990-2004
Billions
30
25
Rest of
World
20
EU15
15
Taiwan
Mexico
10
S. Korea
Japan
5
China
4%
Canada
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 6. U.S. Imports of Specialized Industrial Machinery
(SITC 72) from Selected Countries and Country Groups,
1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
EU15
6,786
10,398
9,511
8,463
9,586
11,656
Japan
3,340
6,098
4,479
4,217
4,445
6,105
Canada
1,384
2,580
2,297
2,294
2,556
3,010
China
23
280
331
485
791
1,069
Mexico
139
506
537
490
578
862
Korea
69
425
305
325
467
746
Taiwan
313
704
626
638
623
730
ASEAN
13
113
101
113
145
250
Hong Kong
18
10
12
17
15
18
Rest of World
868
1,519
1,314
1,373
1,614
2,049
World
12,953
22,633
19,513
18,415
20,820
26,495
Source: U.S. Department of Commerce

---

CRS-26
Office Machines and Computers. In U.S. imports of office machines and
automatic data processing machines (including television sets, computers and
computer hardware), China has quickly become the largest supplier. Imports of such
products from China rose by over 50% in both 2003 and 2004 and now account for
38% of U.S. imports in this category. Office machines and computers from other
Asian producers — Japan, South Korea, and Taiwan — have been leveling off or
decreasing, although many of their high tech manufacturers have built plants in China
and export from there. The top exporters of office machines and data processing
machines to the United States in 2004 were China, Malaysia, Japan, Mexico,
Singapore, and Taiwan.
Figure 11. U.S. Imports of Office Machines and
Automatic Data Processing Machines (SITC 75) by
Country and Group, 1990-2004
$Billions
100
Rest of
World
EU15
80
ASEAN
Taiwan
60
Mexico
S. Korea
Japan
40
20
China
38%
0
Canada
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 7. U.S. Imports of Office Machines and Automatic Data
Processing Machines (SITC 75) from Selected Countries and
Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
117
10,980
10,761
15,230
23,612
35,579
ASEAN
5,150
24,475
20,676
22,043
21,571
22,460
Japan
11,007
15,878
11,055
9,464
8,978
9,282
Mexico
706
9,058
10,377
8,828
7,516
7,726
Taiwan
3,084
10,592
8,751
8,659
6,996
6,132
EU15
2,461
6,156
4,676
4,505
4,815
4,810
Korea
1,347
7,831
4,657
4,632
3,779
3,885
Canada
1,893
3,778
2,942
1,825
1,644
1,865
Hong Kong
809
345
276
392
328
304
Rest of World
297
3,041
1,729
1,342
2,947
1,492
World
26,871
92,134
75,900
76,920
80,542
93,535
Source: U.S. Department of Commerce

---

CRS-27
Telecommunications and Sound Equipment. China’s share of U.S.
imports of telecommunications and sound equipment has risen to 28%. Such imports
from China rose from $1.1 billion in 1990 to $24 billion in 2004. Imports of these
products from other Asian countries have also been rising. The largest suppliers of
telecommunications and sound equipment to the United States in 2004 were China,
Mexico, South Korea, Japan, and Malaysia.
Figure 12. U.S. Imports of Telecommunications and
Sound Equipment (SITC 76) by Country and Group,
1990-2004
$Billions
100
Rest of
World
80
EU15
ASEAN
Taiwan
60
Mexico
S. Korea
40
Japan
20
China
28%
Canada
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 8. U.S. Imports of Telecommunications and Sound
Equipment (SITC 76) from Selected Countries and Country
Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
1,142
9,812
10,062
14,144
16,723
24,311
Mexico
2,302
16,073
15,765
14,483
14,239
17,475
ASEAN
3,122
8,779
8,548
9,514
10,218
11,779
Korea
1,632
4,729
6,001
6,353
7,955
10,942
Japan
9,061
11,429
8,577
8,473
8,889
9,967
EU15
890
3,860
3,883
4,559
4,051
3,707
Canada
972
9,846
4,533
3,543
3,053
3,435
Taiwan
1,426
2,986
2,361
2,137
2,655
3,261
Hong Kong
478
262
224
357
522
647
Rest of World
322
2,118
2,446
2,264
2,363
1,941
World
21,347
69,894
62,400
65,827
70,668
87,465
Source: U.S. Department of Commerce

---

CRS-28
Electrical Machinery and Parts. U.S. imports of electrical machinery and
parts (including semi-conductors) have been growing dramatically from nearly all
major suppliers. At 16% of such imports in 2004, China has become a significant
supplier — surpassing Japan and ASEAN. Other leading exporters are Mexico and
the European Union.
Figure 13. U.S. Imports of Electrical Machinery and Parts
(SITC 77) by Country and Group, 1990-2004
$Billions
120
100
Rest of
World
80
EU15
ASEAN
60
Taiwan
Mexico
40
S. Korea
Japan
20
H.Kong
China
16%
0
Canada
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 9. U.S. Imports of Electrical Machinery and Parts
(SITC 77) from Selected Countries and Country Groups,
1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
Mexico
4,406
17,828
16,290
16,930
17,547
19,120
China
652
9,037
9,047
10,217
11,808
15,197
EU15
4,898
11,922
11,009
10,881
11,462
12,314
ASEAN
4,644
20,295
13,748
12,427
11,308
11,557
Japan
8,658
18,096
11,941
9,406
8,713
10,251
Taiwan
2,180
8,492
5,878
5,296
5,160
6,170
Korea
2,504
9,327
5,194
5,150
5,105
5,992
Canada
3,323
6,499
5,871
5,025
4,920
5,619
Hong Kong
792
1,782
1,050
881
585
637
Rest of World
1,080
4,988
4,112
4,359
4,916
5,414
World
33,137
108,266
84,140
80,572
81,524
92,271
Source: U.S. Department of Commerce

---

CRS-29
Road Motor Vehicles. In 2003, China became the world’s third largest auto
market and fourth largest auto producer. However, China is not a significant player
in the U.S. car market. U.S. road vehicle and related imports from China mainly
consist of auto parts, bicycles and motorcycles, and specialty vehicles such as golf
carts and beach go-carts. China is expected to lower tariffs on imported automobiles
to 25-30% in 2005, down from 35% in 2004, pursuant to China’s WTO accession
agreement. China’s own automobile production has absorbed heavy foreign
investment — over 80% of the country’s car market is held by Sino-foreign joint-
ventures such as Shanghai Volkswagen and Shanghai General Motors (GM) — and
is aimed primarily at Chinese buyers.31
China has become an important supplier of auto parts to the United States with
$1.4 billion in selected parts in 2004, but trails Canada ($11.1 billion), Japan ($8.5
billion), Mexico ($6.6 billion), and Germany ($1.8 billion). China exported $470
million worth of motorcycles to the United States in 2004, accounting for 15% of
U.S. motorcycle imports compared to Japan’s 66%. Chinese auto makers such as
Geely have begun exporting sedans to some Middle Eastern, North African, and
South American countries. In addition, China has become a major supplier of
motorcycles to Southeast Asia and, according to some analysts, poses a threat to
Korean auto and auto-parts exports to Southeast Asia.
31 Among foreign auto-makers in China, Volkswagen leads with about one-third of the
Chinese car market; Shanghai-General Motors has captured about 10% of the market.

---

CRS-30

---

CRS-31
Figure 14. U.S. Imports of Road Motor Vehicles (SITC 78)
by Country and Group, 1990-2004
$Billions
200
Rest of
World
EU15
150
Mexico
S. Korea
100
Japan
China
50
1.7%
Canada
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 10. U.S. Imports of Road Motor Vehicles (SITC 78) from
Selected Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
Canada
26,094
55,703
50,477
52,050
52,448
58,832
Japan
29,839
42,917
41,429
45,449
43,178
45,033
EU15
12,270
27,176
28,022
31,043
35,975
37,813
Mexico
4,084
25,991
26,246
26,181
25,222
26,114
Korea
1,275
5,222
6,778
7,382
8,503
10,773
China
59
1,800
1,404
1,796
2,369
3,267
Taiwan
871
1,335
1,124
1,239
1,387
1,522
ASEAN
88
249
247
280
297
359

Hong Kong
7
30
13
14
38
43
Rest of World
930
2,205
2,892
3,338
4,271
4,412
World
75,517
162,628
158,632
168,772
173,688
188,168
Source: U.S. Department of Commerce
Building and Lighting Products. In U.S. imports of prefabricated
buildings, sanitary, plumbing, heating and lighting fixtures and fittings, China has
surged to become a dominant factor. The PRC accounted for over half such imports
in 2004, although total imports of such products amounted to only $6.8 billion,
making it the 12th largest Chinese import to the United States.

---

CRS-32
Figure 15. U.S. Imports of Building and Lighting Products
(SITC 81) by Country and Group, 1990-2004
$Billions
7
Rest of
World
6
EU15
ASEAN
Taiwan
5
Mexico
Japan
4
H Kong
3
China
2
54%
1
Canada
0
90
91
92
93
94
95
96
97
98
99 2000
1
2
3
4
Year
Source: U.S. Department of Commerce
Table 11. U.S. Imports of Prefabricated Buildings, Sanitary,
Plumbing, Heating and Lighting Fixtures and Fittings (SITC 81)
from Selected Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
94
2,555
2,383
2,962
3,199
3,697
Mexico
117
819
903
961
1,036
1,132
Canada
80
544
572
598
617
693
EU15
205
384
329
319
356
428
Taiwan
495
235
156
152
151
154
ASEAN
27
132
116
106
115
121
Hong Kong
47
94
70
77
80
73
Japan
28
63
59
36
41
49
Korea
61
26
32
36
42
37
Rest of World
78
255
275
319
362
422
World
1,232
5,107
4,895
5,566
5,999
6,806
Source: U.S. Department of Commerce

---

CRS-33
Furniture. In U.S. imports of furniture and related parts, China has become
a major supplier. It accounted for over nearly 40% of U.S. furniture imports in 2004,
prompting complaints of dumping by some U.S. furniture manufacturers. China’s
share of U.S. furniture imports was roughly double those of Canada and Mexico,
which were the leading foreign suppliers of furniture until the late 1990s.
Figure 16. U.S. Imports of Furniture and Parts (SITC 82) by
Country and Group, 1990-2004
$Billions
30
Rest of
World
25
EU15
ASEAN
20
Taiwan
Mexico
15
10
China
39%
5
Canada
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 12. U.S. Imports of Furniture and Parts (SITC 82) from
Selected Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
145
4,476
5,017
6,954
8,742
10,905
Canada
1,209
4,859
4,411
4,423
4,551
5,007
Mexico
578
3,201
3,212
3,824
4,275
4,316
EU15
1,174
2,473
2,309
2,321
2,489
2,491
ASEAN
331
1,593
1,492
1,753
1,886
2,303
Taiwan
1,009
1,031
765
794
748
753
Japan
162
141
141
107
135
181
Hong Kong
29
84
98
90
109
97
Korea
67
85
75
75
69
68
Rest of World
299
980
1,081
1,219
1,289
1,557
World
5,003
18,923
18,601
21,560
24,293
27,678
Source: U.S. Department of Commerce

---

CRS-34
Travel Goods and Handbags. China has become the dominant supplier of
imported travel goods, handbags, and similar items, accounting for over 70% of U.S.
imports of such merchandise in 2004. The EU has become an important supplier
while China appears to have taken market shares from South Korea, Taiwan, and,
more recently, ASEAN. This U.S. import category is ranked only 41st in total
customs value.
Figure 17. U.S. Imports of Travel Goods, Handbags, and
Similar Products (SITC 83) by Country and Group, 1990-
2004
$Billions
6
Rest of
World
5
EU15
ASEAN
4
Taiwan
Mexico
3
S. Korea
H.Kong
2
China
71%
1
0
90
91
92
93
94
95
96
97
98
99 2000
1
2
3
4
Year
Source: U.S. Department of Commerce
Table 13. U.S. Imports of Travel Goods, Handbags, (SITC 83)
from Selected Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
692
2,214
2,211
2,741
3,136
3,936
EU15
270
430
463
476
602
715
ASEAN
114
811
836
538
372
340
Hong Kong
50
59
46
52
85
95
Mexico
46
145
104
87
69
63
Taiwan
406
138
129
52
79
47
Canada
17
42
39
35
37
35
Korea
446
143
106
56
39
31
Japan
9
7
7
7
8
12
Rest of World
121
412
384
292
233
248
World
2,171
4,401
4,325
4,336
4,660
5,522
Source: U.S. Department of Commerce

---

CRS-35
Apparel and Clothing. U.S. imports of apparel and clothing accessories
from China have been rising, reaching 18% of U.S. imports in 2004. According to
some estimates, more than 80% of Chinese apparel exports are produced by joint-
ventures, many of them involving East Asian investment.32 Global quotas on
imported textiles and apparel expired on January 1, 2005, pursuant to the Multi-Fiber
Agreement, resulting in a surge in garment imports from China. Year-to-date
(January-June 2005) apparel imports from China have increased by 69% compared
to the same period in 2004. Other nations with large gains in U.S. apparel imports
are India (38%), Bangladesh (23%), and Indonesia (17%). Those with large
declining shares include Macao, Hong Kong, South Korea, and Taiwan.33 Although
wages for low skill labor in China reportedly are rising relative to other developing
countries, Chinese clothing manufacturers retain competitive advantages such as high
labor productivity, “vertical integration” — the ability to produce all manufacturing
inputs domestically — and developed infrastructure.
Figure 18. U.S. Imports of Apparel and Clothing Accessories
(SITC 84) by Country and Group, 1990-2004
$Billions
80
Rest of
60
World
EU15
40
ASEAN
Taiwan
Mexico
20
S. Korea
H.Kong
China
18%
0
Canada
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
32 Jiang Jingjin, “China Not the Only Beneficiary,” China Daily (China Business Weekly),
April 5, 2004.
33 U.S. Census Bureau, “Foreign Trade Statistics,” August 2005.

---

CRS-36
Table 14. U.S. Imports of Apparel and Clothing Accessories
(SITC 84) from Selected Countries and Country Groups,
1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
3,422
8,473
8,852
9,538
11,341
13,567
ASEAN
3,404
9,354
9,581
10,020
11,773
12,157
Mexico
709
8,730
8,127
7,731
7,199
6,943
Hong Kong
3,974
4,571
4,282
3,928
3,760
3,919
EU15
1,790
2,540
2,584
2,473
2,564
2,586
Korea
3,244
2,461
2,354
2,206
1,925
1,936
Canada
247
1,911
1,764
1,799
1,740
1,692
Taiwan
2,475
2,160
1,907
1,664
1,690
1,626
Japan
158
109
170
205
252
325
Rest of World
5,891
23,872
24,168
24,150
25,907
27,438
World
25,314
64,181
63,789
63,714
68,060
72,189
Source: U.S. Department of Commerce
Footwear. U.S. imports of footwear from China surged during the 1990s.
From $1.5 billion in 1990, they rose to over $10 billion in 2002 or two-thirds of all
such imports. China has largely replaced South Korea and Taiwan as the main
source of Asian-produced footwear in the United States. Other large exporters are
Italy and Brazil.
Figure 19. U.S. Imports of Footwear (SITC 85) by
Country and Group, 1990-2004
$Billions
20
Rest of
15
World
EU15
ASEAN
Mexico
10
Taiwan
5
China
S. Korea
68%
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce

---

CRS-37
Table 15. U.S. Imports of Footwear (SITC 85) from Selected
Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
China
1,475
9,206
9,766
10,241
10,546
11,347
EU15
1,523
2,044
1,950
1,826
1,763
1,722
ASEAN
579
1,207
1,185
1,237
1,184
1,259
Mexico
165
351
311
278
275
242
Hong Kong
109
67
81
67
60
86
Taiwan
1,528
92
75
73
73
80
Canada
53
76
78
67
64
76
Korea
2,558
140
103
65
50
51
Japan
5
2
2
2
2
2
Rest of World
1,543
1,671
1,698
1,523
1,542
1,632
World
9,538
14,856
15,249
15,379
15,559
16,497
Source: U.S. Department of Commerce

---

CRS-38
Professional, Scientific, and Controlling Instruments. China is a
minor supplier of U.S. imports of professional, scientific and controlling instruments,
supplying 7.6% of U.S. imports in this category in 2004. Over two-thirds of such
imports originate in the European Union, Mexico, and Japan.
Figure 20. U.S. Imports of Professional, Scientific, and
Controlling Instruments (SITC 87) by Country and Group, 1990-
2004
$Billions
30
Rest of
25
World
20
EU15
15
ASEAN
Taiwan
10
Mexico
Japan
5
China
7.6%
Canada
0
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 16. U.S. Imports of Professional, Scientific and
Controlling Instruments and Apparatus (SITC 87) from Selected
Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
EU15
2,310
6,980
6,887
6,543
7,744
10,225
Mexico
513
3,665
3,895
4,436
5,090
5,082
Japan
1,494
4,075
3,561
2,902
3,177
4,016
China
74
1,025
1,172
1,301
1,660
2,176
Canada
527
2,167
1,793
1,575
1,406
1,611
ASEAN
152
860
1,027
1,037
1,139
1,448
Taiwan
176
434
372
393
450
458
Korea
89
152
152
156
153
177
Hong Kong
82
87
55
67
70
67
Rest of World
604
2,177
2,287
2,400
2,675
3,101
World
6,021
21,622
21,201
20,810
23,564
28,361
Source: U.S. Department of Commerce

---

CRS-39
Photographic and Optical Equipment and Timepieces. China is a
rising supplier of photographic apparatus, equipment and supplies and optical goods
as well as watches and clocks. In 2004, China accounted for 18% of U.S. imports of
such products. Japan and the European Union still dominate U.S. imports. By
country, the top three suppliers of such imports for the United States are Japan,
China, and Switzerland.
Figure 21. U.S. Imports of Photographic Equipment, Optical
Goods, Watches and Clocks (SITC 88) by Country and Group,
1990-2004
$Billions
16
14
12
Rest of
World
10
EU15
8
ASEAN
Taiwan
6
Mexico
Japan
4
H Kong
2
China
18%
0
Canada
90
91
92
93
94
95
96
97
98
99 2000 1
2
3
4
Year
Source: U.S. Department of Commerce
Table 17. U.S. Imports of Photographic Apparatus, Equipment
and Supplies and Optical Goods; Watches and Clocks (SITC 88)
from Selected Countries and Country Groups, 1990, 2000-2004
(millions of dollars)
1990
2000
2001
2002
2003
2004
Japan
2,668
4,450
3,848
3,309
3,138
3,140
EU15
1,619
2,868
2,439
2,535
2,612
2,716
China
191
2,016
1,908
1,842
2,001
2,239
Mexico
128
802
648
634
555
665
ASEAN
199
745
650
664
587
614
Canada
180
904
545
414
461
428
Taiwan
334
342
282
288
280
265
Hong Kong
526
378
236
200
164
182
Korea
127
179
168
150
134
124
Rest of World
574
1,626
1,348
1,353
1,510
1,797
World
6,546
14,310
12,072
11,389
11,442
12,170
Source: U.S. Department of Commerce

---

CRS-40
Foreign Direct Investment in China
Fueling China’s export boom is an unprecedented infusion of foreign capital in
the manufacturing sector.34 Foreign direct investment (FDI) is directed toward
investments in companies in which the foreign investor has a controlling interest. It
is primarily for physical plant and equipment and for the costs of establishing
enterprises in China. It is not for portfolio investment on China’s stock exchanges.
In 2002, China overtook the United States as the world’s largest recipient of foreign
direct investment. In 2004, China remained in that position, with $64 billion in
utilized FDI. The United States is one of the largest sources of utilized FDI in China,
investing $3.9 billion in 2004. (See Table 18.) China relies heavily upon investment
from Hong Kong and other East Asian countries and regions. A significant amount
of FDI from Hong Kong comes from Taiwan or from mainland Chinese companies
via their subsidiaries in Hong Kong.35 Annual or utilized FDI from Japan and South
Korea surpassed that of the United States in 2003. In 2004, South Korea surpassed
Japan as the third largest source of FDI in China. The United States remains the
second largest source of cumulative FDI after Hong Kong. China’s WTO
commitments include allowing more foreign investment in sectors such as
telecommunications, energy, banking, and insurance.
Table 18. China’s Utilized Foreign Direct Investment Inflows,
Top Foreign Investors, 2000-2004
(billions of dollars)
Country or Region
2000
2001
2002
2003
2004
Hong Kong
15.50
16.7
17.8
17.7
18.9
Virgin Islands36
3.84
5.0
6.1
5.7
6.7
South Korea
1.49
2.1
2.7
4.5
6.2
Japan
2.91
4.3
4.2
5.0
5.4
United States
4.38
4.4
5.4
4.2
3.9
Taiwan
2.29
2.9
3.9
3.4
3.1
Singapore
2.17
2.1
2.3
2.0
2
Germany
1.04
1.2
0.9
0.8
1
All Sources
40.71
46.9
52.7
53.5
64
Sources: U.S. Department of State, 2005 Investment Climate Statement — China; U.S.-China
Business Council.
34 For further discussion of China’s economy and foreign investment, see CRS Issue Brief
IB98014, China’s Economic Conditions, by Wayne Morrison.
35 Mainland subsidiaries in Hong Kong and Macao can take advantage of investment
incentives for foreign companies on the PRC mainland.
36 Many foreign firms, including U.S. companies, are registered in the Virgin Islands,
Cayman Islands, and Western Samoa for tax purposes.

---

CRS-41
Appendix
Table A1. China’s Merchandise Trade with the World, 1983-2004
(millions of dollars)
China’s Trade with the World
World Trade with China
(Chinese data)
(Partner Country Data)
Year
China
China
China
World
World
World
Exports
Imports
Balance
Exports
Imports
Balance
1983
22,096
21,313
783
18,230
22,908
-4,678
1984
24,824
25,953
-1,129
24,640
26,904
-2,264
1985
27,329
42,534
-15,205
38,355
30,867
7,488
1986
31,367
43,247
-11,880
36,152
35,310
842
1987
39,464
43,222
-3,758
39,250
46,654
-7,404
1988
47,663
55,352
-7,689
51,794
59,748
-7,954
1989
52,916
59,131
-6,215
51,666
72,810
-21,144
1990
62,876
53,915
8,961
49,036
88,692
-39,656
1991
71,940
63,855
8,085
61,732
112,372
-50,640
1992
85,492
81,843
3,649
81,996
136,853
-54,857
1993
91,611
103,552
-11,941
108,406
156,896
-48,490
1994
120,822
115,629
5,193
120,634
191,663
-71,029
1995
148,892
132,063
16,829
145,897
233,614
-87,717
1996
151,093
138,949
12,144
156,200
254,440
-98,240
1997
182,917
142,163
40,754
165,230
286,540
-121,310
1998
183,744
140,385
43,359
152,890
289,620
-136,730
1999
194,932
165,717
29,215
162,650
322,080
-159,430
2000
249,212
225,097
24,115
212,060
398,060
-186,000
2001
266,200
243,600
22,600
221,450
413,280
-191,830
2002
325,642
295,302
30,339
270,930
483,610
-212,680
2003
438,472
413,095
25,377
422,590
601,920
-179,330
2004
622,808
581,727
41,081
527,370
794,480
-267,110
Note: Summation of data reported by 109 of China’s trading partner countries in 1983 and 156
countries in 2004.
Sources: Chinese data: PRC General Administration of Customs; Global Trade Atlas. World Data:
International Monetary Fund, Direction of Trade Statistics, Yearbook, various years.

---

CRS-42
Table A2. U.S. Merchandise Trade with China and China’s
Merchandise Trade with the United States, 1983-2004
(millions of dollars)
U.S. Trade with China
China’s Trade with U.S.
(U.S. data)
(Chinese data)
Year
U.S.
U.S.
U.S.
China
China
China
Exports
Imports
Balance
Exports
Imports
Balance
1983
2,173
2,477
-304
1,713
2,753
-1,040
1984
3,004
3,381
-377
2,313
3,837
-1,524
1985
3,856
4,224
-368
2,336
5,199
-2,863
1986
3,106
5,241
-2,135
2,633
4,718
-2,085
1987
3,497
6,910
-3,413
3,030
4,836
-1,806
1988
5,017
9,261
-4,244
3,399
6,633
-3,234
1989
5,807
12,901
-7,094
4,414
7,864
-3,450
1990
4,807
16,296
-11,489
5,314
6,591
-1,277
1991
6,287
20,305
-14,018
6,198
8,010
-1,812
1992
7,470
27,413
-19,943
8,599
8,903
-304
1993
8,767
31,183
-22,416
16,976
10,633
6,343
1994
9,287
41,362
-32,075
21,421
13,977
7,444
1995
11,749
48,521
-36,772
24,744
16,123
8,621
1996
11,978
54,409
-42,431
26,731
16,179
10,552
1997
12,805
65,832
-53,027
32,744
16,290
16,454
1998
14,258
75,109
-60,851
38,001
16,997
21,004
1999
13,118
81,786
-68,668
41,946
19,480
22,466
2000
16,253
100,063
-83,810
52,104
22,363
29,741
2001
19,234
102,280
-83,046
54,300
26,200
28,100
2002
22,053
125,167
-103,115
69,959
27,227
42,731
2003
26,806
151,620
-123,960
92,510
33,882
58,628
2004
34,721
196,699
-161,978
124,973
44,652
80,321
Sources: U.S. data from U.S. Department of Commerce. Chinese data from PRC, General
Administration of Customs.

---

CRS-43
Table A3. Japan’s Merchandise Trade with China and China’s
Merchandise Trade With Japan, 1983-2004
(millions of dollars)
Japan’s Trade with China
China’s Trade with Japan
(Japanese Data)
(Chinese Data)
Year
Japan
Japan
Japan
China
China
China
Exports
Imports
Balance
Exports
Imports
Balance
1983
4,918
5,089
-171
4,517
5,495
-978
1984
7,199
5,943
1,256
5,155
8,057
-2,902
1985
12,590
6,534
6,056
6,091
15,178
-9,087
1986
9,936
5,727
4,209
5,079
12,463
-7,384
1987
8,337
7,478
859
6,392
10,087
-3,695
1988
9,486
9,861
-375
8,046
11,062
-3,016
1989
8,477
11,083
-2,606
8,395
10,534
-2,139
1990
6,145
12,057
-5,912
9,210
7,656
1,554
1991
8,605
14,248
-5,643
10,252
10,032
220
1992
11,967
16,972
-5,005
11,699
13,686
-1,987
1993
17,353
20,651
-3,298
15,782
23,303
-7,521
1994
18,687
27,569
-8,882
21,490
26,319
-4,829
1995
21,934
35,922
-13,988
28,466
29,007
-541
1996
21,827
40,405
-18,578
30,888
29,190
1,698
1997
21,692
41,827
-20,135
31,820
28,990
2,830
1998
20,182
37,079
-16,897
29,718
28,307
1,411
1999
23,450
43,070
-19,620
32,400
33,768
-1,368
2000
30,440
55,340
-24,900
41,611
41,520
90
2001
30,941
57,795
-26,558
45,078
42,810
2,267
2002
40,001
61,882
-21,881
48,483
53,489
-5,006
2003
57,474
75,579
-18,105
59,453
74,204
-14,751
2004
73,971
94,446
-20,475
73,536
94,191
-20,655
Sources: IMF, Direction of Trade Statistics Quarterly; Global Trade Atlas; PRC, General
Administration of Customs.

---

CRS-44
Table A4. European Merchandise Trade with China and China’s
Merchandise Trade with the European Union, 1983-2004
(millions of dollars)
EU Trade with China
China’s Trade with the EU
(EU data)
(Chinese Data)
Year
EU
EU
EU
China
China
China
Exports
Imports
Balance
Exports
Imports
Balance
1983
2,573
2,485
88
2,508
3,390
-882
1984
2,929
2,639
290
2,232
3,323
-1,091
1985
5,484
2,971
2,513
2,283
6,157
-3,874
1986
6,403
4,106
2,297
4,017
7,757
-3,740
1987
6,430
5,945
485
3,916
7,274
-3,358
1988
6,772
7,719
-947
4,746
8,176
-3,430
1989
7,360
9,877
-2,517
5,114
9,785
-4,671
1990
7,373
13,289
-5,916
6,275
9,147
-2,872
1991
7,719
18,160
-10,441
7,127
9,297
-2,170
1992
9,604
20,995
-11,391
8,004
10,863
-2,859
1993
14,301
23,730
-9,429
12,258
15,739
-3,481
1994
16,246
27,644
-11,398
15,418
18,604
-3,186
1995
19,327
32,333
-13,006
19,258
21,313
-2,055
1996
18,387
35,440
-17,053
19,868
19,883
-15
1997
18,054
42,172
-24,118
23,865
19,205
4,660
1998
19,298
47,005
-27,707
28,148
20,715
7,433
1999
20,326
52,573
-32,247
30,207
25,463
4,744
2000
23,063
64,022
-40,958
38,193
30,845
7,348
2001
26,620
67,634
-41,025
40,904
35,723
5,181
2002
32,195
77,495
-45,227
48,184
38,552
9,632
2003
44,974
108,132
-63,158
72,457
53,112
19,345
2004
57,703
146,774
-89,071
99,836
68,005
31,831
Note: From 1980-88, data are for the 12 nations of the European Economic Community and after 1988
for the 15 nations of the EU (addition of Austria, Finland, and Sweden).
Sources: IMF. Direction of Trade Statistics Quarterly; PRC. General Administration of Customs;
Global Trade Atlas.

---

CRS-45
Table A5. Major Country Merchandise Exports to China, Imports from China, and Trade Balances with China,
2003 and 2004
(billions of dollars)
Trading Partner Data
Chinese Data
Partner
2003
2004
2003
2004
Exp
Imp Bal
Exp
Imp
Bal
Exp
Imp
Bal
Exp
Imp
Bal
U.S.
26.7
151.6
-123.9
34.7
196.6
-161.9
33.8
92.5
-58.7
44.6
124.9
-80.3
Japan
57.4
75.5
-18.1
73.9
94.4
-20.5
74.2
59.4
14.8
94.2
73.5
20.7
EU-15
44.9
108.1
-63.2
57.7
146.7
-89.0
52.7
72.4
-19.7
68.0
99.8
31.8
Hong Kong
95.2
100.7
-5.5
114.2
118.0
-3.8
11.1
76.3
-65.2
11.8
101.0
-89.2
Taiwan a
49.7
12.9
36.8
44.9
16.7
28.2
49.3
9.0
40.3
64.7
13.5
51.2
S. Korea
39.2
22.1
17.1
54.9
29.2
25.7
43.1
20.1
23.0
62.0
27.8
34.2
Germany
20.5
25.4
-4.9
26.0
38.4
-12.4
24.4
17.4
7.0
30.0
23.7
6.3
Singapore
10.1
11.0
-0.9
15.4
16.2
-0.8
10.4
8.8
1.6
14.0
12.6
1.4
U.K.
3.1
19.6
-16.5
4.3
19.1
-14.8
3.5
10.8
-7.3
4.7
14.9
-10.2
France
5.3
10.8
-5.5
6.7
14.5
-7.8
6.0
7.3
-1.3
7.6
9.9
-2.3
Sources: IMF, Direction of Trade Statistics Quarterly (June 2004); Global Trade Atlas; Hong Kong Trade Development Council; Ministry of Economic Affairs, Board of Foreign
Trade (Taiwan).
a. Taiwan exports and imports include China mainland and Hong Kong Special Administrative Region (SAR).

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CRS-46
Table A6. U.S. Merchandise Trade Balances with Selected Asian Developing Nations, 1983-2004
(millions of dollars)
Year
China
Indonesia
S. Korea
Malaysia
Philippines
Taiwan
Thailand
1983
-305
-4,212
-1,953
-529
-370
-7,714
-131
1984
-377
-4,674
-4,188
-9983
-913
-11,266
-381
1985
-373
-4,152
-4,992
-936
-959
-13,295
-804
1986
-2,135
-2,757
-7,588
-807
-805
-16,069
-1,018
1987
-3,422
-2,955
-10,326
-1,159
-898
-19,221
-904
1988
-4,237
-2,438
-10,578
-1,715
-1,069
-14,314
-1,739
1989
-7,094
-2,618
-7,115
-2,052
-1,102
-14,305
-2,343
1990
-11,488
-1,785
-4,888
-2,071
-1,151
-12,347
-2,597
1991
-14,018
-1,675
-2,224
-2,446
-1,439
-11,038
-2,693
1992
-19,943
-1,927
-2,732
-4,144
-1,870
-10,601
-3,944
1993
-24,927
-3,117
-3,003
-4,858
-1,646
-10,050
-5,214
1994
-32,076
-4,209
-2,346
-7,454
-2,137
-10,864
-5,938
1995
-36,772
-4,599
523
-9,162
-2,070
-10,863
-5,452
1996
-42,431
-4,778
3,286
-9,809
-2,372
-12,610
-4,587
1997
-53,026
-5,222
1,269
-7,695
-3,370
-13,331
-5,699
1998
-56,927
-7,042
-7,456
-10,043
-5,211
-14,960
-8,198
1999
-68,668
-7,575
-8,308
-12,349
-5,153
-16,077
-9,340
2000
-83,810
-7,839
-12,398
-14,573
-5,147
-16,134
-9,747
2001
-83,045
-7,605
-12,988
-12,956
-3,666
-15,239
-8,733
2002
-103,115
-7,062
-12,979
-13,661
-3,715
-13,805
-9,939
2003
-123,960
-6,999
-12,864
-14,517
-2,068
-14,111
-9,338
2004
-161,977
-8,142
-19,829
-17,288
— 2072
-12,866
-11,214
Source: U.S. Department of Commerce, International Trade Commission.

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