Order Code RL31403
CRS Report for Congress
Received through the CRS Web
China’s Trade with the
United States and the World
Updated March 14, 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 for economic gain. Members of the 109th Congress have introduced
several bills that would impose trade sanctions on China for intervening in the
currency market 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 further 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 ($201 billion in 2005, a 25% rise
over 2004). In 2003, China replaced Mexico as the second largest source of imports
for the United States. China’s share of U.S. imports was 14.6% in 2005, 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
as well, although from a low base. In 2004, China replaced Germany and the United
Kingdom to become the fourth largest market for U.S. goods. China is purchasing
heavily from its Asian trading partners — particularly precision 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 the past decade, the most dramatic increases in U.S. imports from China have
been not in labor-intensive sectors but in some 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, particularly the East Asian newly
industrialized countries (NICS), which have moved most of their low-end production
facilities to China. However, in absolute terms, total exports from the East Asia
region to the United States have continued to grow.
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 . . . . . . . . . . . . . 35
Photographic and Optical Equipment and Timepieces . . . . . . . . . . . . 36
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 4. U.S. Exports, Imports, and Balance of Trade with China,
1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 5. Japan’s Merchandise Imports, Exports, and Balance of Trade with
China, 1983-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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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
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Figure 8. Top Six Imports from China by Industry, 1994-2005 . . . . . . . . . . . . . 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. 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. 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, 1999-2005 . . . . . . . . . . . . . . . 10
Table 2. Top Twenty U.S. Exports to China, 1997-2005 . . . . . . . . . . . . . . . . . . 17
Table 3. Top Twenty U.S. Imports from China, 1997-2005 . . . . . . . . . . . . . . . . 19
Table 4. U.S. Balance of Trade with China by Sector, 2003-2005 . . . . . . . . . . . 21
Table 5. U.S. Imports of Iron and Steel Products (SITC 67) from Selected
Countries and Country Groups, 1991, 2000-2005 . . . . . . . . . . . . . . . . . . . . 23
Table 6. U.S. Imports of Specialized Industrial Machinery (SITC 72) from
Selected Countries and Country Groups, 1990, 2001-2005 . . . . . . . . . . . . . 24
Table 7. U.S. Imports of Office Machines and Automatic Data Processing
Machines (SITC 75) from Selected Countries and Country Groups,
1990, 2001-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table 8. U.S. Imports of Telecommunications and Sound Equipment
(SITC 76) from Selected Countries and Country Groups,
1990, 2001-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Table 9. U.S. Imports of Electrical Machinery and Parts (SITC 77) from
Selected Countries and Country Groups, 1990, 2001-2005 . . . . . . . . . . . . . 27

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Table 10. U.S. Imports of Road Motor Vehicles (SITC 78) from
Selected Countries and Country Groups, 1990, 2001-2005 . . . . . . . . . . . . . 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, 2001-2005 . . . . . . . . . . . . . . . . . . . . 30
Table 12. U.S. Imports of Furniture and Parts (SITC 82) from Selected
Countries and Country Groups, 1990, 2001-2005 . . . . . . . . . . . . . . . . . . . . 31
Table 13. U.S. Imports of Travel Goods, Handbags, (SITC 83) from
Selected Countries and Country Groups, 1990, 2001-2005 . . . . . . . . . . . . . 32
Table 14. U.S. Imports of Apparel and Clothing Accessories (SITC 84)
from Selected Countries and Country Groups, 1990, 2001-2005 . . . . . . . . 34
Table 15. U.S. Imports of Footwear (SITC 85) from Selected Countries and
Country Groups, 1990, 2001-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Table 16. U.S. Imports of Professional, Scientific and Controlling Instruments
and Apparatus (SITC 87) from Selected Countries and Country Groups,
1990, 2001-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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, 2001-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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, 1984-2005 . . . . . . . . . . 39
Table A2. U.S. Merchandise Trade with China and China’s Merchandise Trade
with the United States, 1984-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Table A3. Japan’s Merchandise Trade with China and China’s Merchandise
Trade with Japan, 1984-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table A4. European Merchandise Trade with China and China’s Merchandise
Trade with the European Union, 1984-2005 . . . . . . . . . . . . . . . . . . . . . . . . 42
Table A5. Major Country Merchandise Exports to China, Imports from China,
and Trade Balances with China, 2004 and 2005 . . . . . . . . . . . . . . . . . . . . . 43
Table A6. U.S. Merchandise Trade Balances with Selected Asian
Developing Nations, 1984-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 $201
billion in 2005. 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 domestic support for the PRC 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

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 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
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].

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CRS-2
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 or challenges raised by the U.S. strategy of economic
engagement with China include adjusting to economic competition in sectors where
China has a comparative advantage, PRC unfair trade advantages, and the rise of an
economically powerful China that is becoming more assertive in global affairs: (1)
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;2
(2) Imports from China may be dumped, subsidized, or unfairly aided by government
entities in China, which still wield considerable influence in the economy;3 (3)
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; (4) China has a poor record of adopting or enforcing internationally
recognized standards for working conditions and environmental regulation which, in
addition to violating human rights and harming the environment, may provide PRC
businesses with unfair competitive advantages; and (5) U.S. economic engagement
with China arguably contributes to the legitimacy of the socialist government and the
strengthening of China’s military by facilitating general economic development.
U.S. trade law and WTO regulations can deal with injury from imports and
unfair trade practices. Trade disputes with China would normally be first discussed
bilaterally before taking the case to the WTO for dispute resolution. China’s alleged
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, and multilateral
2 See Sections 201 to 204 of the Trade Act of 1974 (19 U.S.C. §§ 2251-2254).
3 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).

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CRS-3
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 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.
! In December 2004, the U.S. government imposed anti-dumping
duties on imported Chinese bedroom furniture. This case, the largest
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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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.R. 4808 (Jones: Introduced February 28, 2006) To prohibit the
importation of motor vehicles of the PRC until the tariff rates that
China imposes on motor vehicles of the United States are equal to
the rates of duty applicable to motor vehicles of the PRC.
! S. 2267 (Dorgan/Graham: Introduced February 9, 2006) To
withdraw normal trade relations treatment from, and apply certain
provisions of Title IV of the Trade Act of 1974 to, the products of
the People’s Republic of China.
! H.R. 3283 (English: Introduced July 14, 2005) Amends the Tariff
Act of 1930 to impose countervailing duties on certain merchandise
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
from nonmarket economy countries. Passed in the House on July
27, 2005. Related bill: S. 1421 (Collins).
! 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. 728 (Sanders: Introduced February 9, 2005) To withdraw
normal trade relations treatment from the products of the People’s
Republic of 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
to be voted on in October 2005. Related bills: S. 14 (Stabenow),
H.R. 1575 (Myrick), S.Amdt. 309 (Schumer) to S. 600.
! 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.
Summary of Trade Data
What light do the trade data shed on the controversy over economic relations
with China? First, China 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,
after Canada and Mexico,10 while the United States is the PRC’s second largest
trading partner, after the expanded European Union (25 nations).11 In 2005,
according to PRC data, EU-China trade was valued at $217.3 billion compared to
U.S.-China trade of $211.6 billion.12 China’s largest export market is the United
States followed by the EU-25 and Japan. Although China is a new player in
international trade, it is taking major shares of markets once dominated either by
other countries and U.S. domestic industries.
10 In 2005, U.S.-China trade ($285 billion) nearly reached the value of U.S.-Mexico trade
($290 billion). U.S. Census Bureau, Foreign Trade Statistics.
11 “EU Becomes China’s Biggest Trading Partner — USDA Attache,” Reuters News,
February 25, 2005.
12 PRC data. “China 2005 Trade Surplus Jumps to Record High,” Yahoo! Asia News,
January 11, 2006.

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CRS-6
China is the second largest source of U.S. imports of merchandise ($243 billion
in 2005) after Canada ($287 billion). PRC imports surpassed those of Mexico in
2003 and of Japan in 2002. China now accounts for over 14% of U.S. imports
(2005), up from 12% in 2003, 8% in 1999, and 3% in 1990, although this share still
falls short of Japan’s 18% in the early 1990s.
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.)
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%. In 2005,
the United States trade deficit with China constituted 26% of its global trade deficit.
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 157% between 2000 and 2005)
have grown faster than U.S. exports to Canada (up 19.8% over the same period),
Mexico (7.5%), and Japan (-15%), although China’s imports have grown from a low
base.13 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 somewhat more to China ($41.8 billion) than it did to the United Kingdom
($38.6 billion) in 2005. 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.14
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,
as well as 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
13 U.S. Department of Commerce, International Trade Commission.
14 Global Trade Atlas; “Economy Increasingly Dependent on Mainland Ties,” Nikkei
Weekly, June 14, 2004.

---

CRS-7
capital-intensive machinery and equipment, electronic goods, and natural resource-
related products.15
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. In 2003, China became the third largest car market and the fourth largest
maker of automobiles with an output of 4.4 million vehicles. Production of cars
reached an estimated 5.5 million units in 2005, putting the PRC on par with Germany
in automobile production. However, China is not a major global importer or exporter
of cars and it remains heavily reliant upon foreign technology in this sector.16
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,17 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.18
According to PRC data, China’s trade surplus with the United States in 2005
was $114 billion — not $201 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 PRC data, in 2005, China ran deficits with many of its major trading
partners, including Taiwan ($57.9 billion), South Korea ($41.7 billion), Japan ($16.3
billion), Malaysia ($9.5 billion), Saudi Arabia ($8.4 billion), Philippines ($8 billion),
Thailand ($6 billion), Australia ($5 billion), Brazil ($5 billion) Iran ($3.5 billion).19
15 Jonathan Anderson, “China, Asia’s Paper Tiger?” The Asian Wall Street Journal, August
15, 2002.
16 “China to Become 2nd Largest Automaker by 2010,” Asia Times Online
[http://www.atimes.com], August 25, 2005; Xinhua News Agency, April 11, 2005.
17 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.
18 U.S.-China Business Council, “Understanding the U.S.-China Balance of Trade,” May
2003.
19 Global Trade Atlas.

---

CRS-8
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 those of other Pacific
Rim nations have been falling or holding steady. In terms of absolute values, until
recently, U.S. imports from all major Pacific Rim countries continued to rise,
although at slower rates than imports from China. In 2005, U.S. imports from the
East Asian NICS — South Korea, Taiwan, Hong Kong, and Singapore — fell or
barely rose from the previous year.
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.
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). It leaped to $102
billion in 2005.
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).

---

CRS-9
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 2010.20
As mentioned in the previous section, PRC data show much smaller bilateral
trade deficits than those claimed by its trading partners. In 2005, the United States
claimed it had incurred a $201 billion trade deficit with China, while China reported
a trade surplus of only $114 billion with the United States. Japan reported a $28.5
billion merchandise trade deficit with China, while China likewise claimed a $16.3
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).21 (See Appendix Tables A1-A5.)
Not only have the surge in imports from China affected 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 $63.1 billion in 1999 to $271.3 billion in 2005.
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, copper, cotton, and wood, however, can affect world prices, particularly when
combined with rising world demand or tightening supplies. In 2004-05, Chinese
demand for mineral fuel, in particular, including crude petroleum 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 2020.22 Net imports of copper and soybeans, likewise, rose
from virtually zero in 1990 to 15% and 20% in 2002 for copper and soybeans,
respectively.23
20 Global Insight, “International Analysis — China,” August 2005.
21 U.S. Department of Commerce, International Trade Commission; Global Trade Atlas;
International Monetary Fund, Direction of Trade Statistics Quarterly, June 2005.
22 Kris Axtman, “Oil’s New High May Persist,” The Christian Science Monitor, August 19,
2004, p. 1.
23 International Monetary Fund, World Economic Outlook, April 2004, pp. 84-85.

---

CRS-10
Table 1. China’s Imports by Major Commodity, 1999-2005
(billions of dollars)
1999
2000
2001
2002
2003
2004
2005
Electrical Machinery
35.3
50.7
55.9
73.3 104.0
142.1
174.9
Machinery
27.8
34.4
40.6
52.2
71.6
91.5
96.4
Mineral Fuel, Oil, etc.
8.9
20.7
17.5
19.3
29.3
48.0
64.2
Optics, Medical. Instr.
5.0
7.3
9.8
13.5
25.1
40.1
49.9
Plastic
11.6
14.5
15.3
17.4
21.0
28.0
33.3
Organic Chemicals
5.5
8.3
9.0
11.2
16.0
23.8
28.0
Iron and Steel
7.2
9.6
10.9
13.2
22.2
23.6
26.2
Ores, Slag, Ash
2.2
3.1
4.2
4.3
7.2
17.3
25.9
Copper & Articles Thereof
3.1
4.7
4.9
5.7
7.2
10.5
12.9
Vehicles, Not Railway
2.4
3.6
4.5
6.5
11.8
12.9
12.2
Misc. Grain, Seeds, Fruit
1.6
3.1
3.3
2.8
5.7
7.3
8.1
Cotton and Yarn, Fabric
2.4
2.8
2.9
3.3
4.7
6.9
7.0
Aircraft, Spacecraft
3.2
2.2
4.4
4.1
4.5
4.9
6.6
Paper, Paperboard
1.6
2.6
2.7
2.9
3.9
5.2
6.3
Misc. Chemical Products
2.2
2.5
2.6
3.8
4.9
5.1
6.0
Wood, Articles of Wood
2.9
3.7
3.5
4.1
4.6
5.2
5.7
Source: Global 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 trading
partners. In 2004, China’s imports rose by 35%, including machinery, raw materials,
and components for manufacturing, although this growth in imports slowed to 17%
in 2005.24 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.25
China has become the largest trading partner of both 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.26
China has become a huge buyer of raw materials, agricultural commodities,
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.27 China’s top exports to Southeast Asia include machinery, electronic
goods, iron and steel, mineral fuels, textiles and apparel, and optical, photographic,
and medical equipment. Despite worries about economic competition, in 2004,
ASEAN, which ran a trade surplus of $20 billion with China that year (PRC data),28
agreed to establish a free trade zone with China which would be implemented
gradually over five years.29 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.30 Although ASEAN accumulated a trade surplus with China again in
24 Robert J. Samuelson, “The World’s Powerhouse,” Newsweek, May 31, 2004.
25 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.
26 Taiwan data include Hong Kong. Directorate General of Customs, Ministry of Finance,
Republic of China; Korean International Trade Association.
27 Sadanand Dhume, “Buying Fast into Southeast Asia,” Far Eastern Economic Review,
March 28, 2002.
28 Global Trade Atlas
29 “China-ASEAN Trade Surges over 40 Percent in 2003,” Thai News Service, February 11,
2004.
30 Keith Bradsher and David Barboza, “As Exports Boom, China Risks Global Backlash,”
International Herald Tribune, April 9, 2005.

---

CRS-12
2005 ($19.5 billion, according to PRC data), China’s exports to ASEAN grew 50%
faster than its imports from Southeast Asia.
Figure 3. Shares of U.S. Imports by Country and Country Group,
1990 and 2005
1990 ($491 billion)
Rest of World -- 19.3%
Canada -- 18%
NICS -- 10.2%
Mexico -- 6%
EU-15 -- 20%
Japan -- 18%
China -- 3%
ASEAN -- 5.5%
20 05 ( $ 1 ,6
, 6 2 b illio n )
C a n a d a -- 1 7 .2
. %
R e s t t o f W o rld -- 2 0 . 9 %
N IC
I S -- 5 .2
. %
M e xic o -- 1 0 .1
. %
J a p a n -- 8 . 3 %
E U -1 5 -- 1 7 . 8 %
C h in a -- 1
4 .6
. %
A S E A N -- 5 . 9 %
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.31 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 have moved their lower-end production to the PRC, such as Macao,
Hong Kong, South Korea, and Taiwan. In sectors such as footwear, handbags,
apparel, furniture, and building and lighting fixtures, U.S. imports from China have
31 Council of Economic Advisors, Economic Report of the President, February 2004.

---

CRS-13
been displacing those from Hong Kong, South Korea, Taiwan, and Mexico and
reducing imports those from other developing Asian nations. As shown in Figure
3, China’s share of U.S. imports grew from 3% in 1990 to 14% in 2005 (out of total
U.S. imports of $491 billion and $1.66 trillion, respectively),32 while the rest of East
Asia’s share (Japan, NICS,33 and ASEAN) fell from 36% to 19%. Mexico’s share
of U.S. imports grew from 6% in 1990 to 11.6% in 2002. It fell to 10.6% in 2004
and further to 10.1% in 2005.
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 $114 billion in 2005, the United States reports it to be $201 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 the 1980s (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, which was surpassed in 2005 ($28.5
32 U.S. Imports for Consumption, U.S. International Trade Commission.
33 NICS — Hong Kong, Taiwan, and South Korea (Singapore is counted in ASEAN).

---

CRS-14
billion). Japan’s exports to China have grown dramatically in the past few years, its
largest exports to the PRC being electronics, general machinery, iron and steel,
optical, photographic, and medical equipment, and organic chemicals.34
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 Quarte
rly
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.
34 Global Trade Atlas.

---

CRS-15
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 the EU deficit
with China 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 2005, the largest U.S. merchandise
trade deficits were with China ($201 billion), Japan ($82 billion), Canada ($76
billion), Germany ($50 billion), and Mexico ($50 billion). Among East and
Southeast Asian nations in 2005, the United States incurred large trade deficits with
Malaysia ($23 billion) South Korea ($16 billion), Taiwan ($12.8 billion), Thailand
($12.6 billion), and Indonesia ($8.9 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 2005, Japan
exported 2.5 times more to the United States than it imported, while Canada and
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
Mexico exported 1.3 times and 1.4 times more, respectively, than they imported.

---

CRS-16
China, by comparison, exported 5.8 times more to the U.S. market in 2005 than it
imported from the United States. This indicates that the Chinese market has been
vastly underdeveloped as a destination for U.S. exports.
Figure 7. U.S. Merchandise Trade Balances with Selected
Countries in 2005
Country
China
-201
Japan
-82
Canada
-76
Germany
-50
Mexico
-50
Venezuela
-27
Malaysia
-23
Nigeria
-22
Saudi Arabia
-20
Deficit
Italy
-19
Ireland
-19
South Korea
-16
Taiwan
-12
Thailand
-12
United Kingdom
-12
France
-11
Russia
-11
India
-10
Sweden
-10
Singapore
5
Belgium
5
United Arab Emirates
7
Hong Kong
Surplus
7
Australia
8
Netherlands
11
-250
-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 2005, the
top five by dollar value were electrical machinery, transport equipment, metalliferous
ores, oil seeds and fruits, and general industrial machinery. Exports of metalliferous
ores and oil seeds and fruits have grown by over 12 times and 6 times, respectively,
since 1999, suggesting that China’s appetite for raw materials and agricultural
commodities has grown relative to that for general 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 (969%). China’s top ten imports
from the world in 2005 were: electrical machinery, machinery, mineral fuels, optical
and medical instruments, plastics, organic chemicals, iron and steel, iron ores, copper
articles, and vehicles.

---

CRS-17
Table 2. Top Twenty U.S. Exports to China, 1997-2005
(millions of dollars)
Category
1997 1998 1999 2000 2001 2002 2003 2004 2005
Electrical Mach.
741 1,013 1,380 1,747 2,109 2,657 3,722 4,631 5,170
Transport Equip.
2,127 3,604 2,325 1,695 2,471 3,443 2,495 2,025 4,479
Metalliferous Ores
180
195
285
618
919
956 1,525 2,198 3,482
Oil Seeds and Fruits
419
288
354 1,020 1,014
890 2,832 2,332 2,256
Gen. Ind. Mach./Equip.
766
674
685
838 1,080 1,145 1,404 1,912 2,067
Office Machines
343
878
842 1,498 1,602 1,193 1,274 1,396 1,835
Plastics in Prim. Forms
340
320
394
545
628
740
931 1,342 1,793
Prof. & Scientific Instr.
429
527
538
583
886
931 1,167 1,568 1,710
Textile Fibers
682
199
98
154
160
278
909 1,638 1,657
Organic Chemicals
208
212
302
473
373
554 1,054 1,542 1,457
Specialized Industrial
770
538
481
758
819 1,124 1,218 1,744 1,325
Machinery
Telecom, Sound
644
655
573
817 1,204 1,110
978 1,104 1,299
Recording Equip.
Power Gen. Equip.
603
542
505
312
507
462
640
965 1,042
Pulp and Waste Paper
148
156
193
276
330
414
600
753
992
Road Vehicles
348
140
192
185
223
272
506
624
903
Nonferrous Metals
172
120
140
289
144
161
315
333
872
Misc. Manufactures
297
247
242
384
440
509
515
647
750
Hides, Furskins
112
126
96
237
402
397
457
521
629
Chemical Materials
124
143
177
247
285
312
403
582
604
Metalworking Mach.
173
190
162
211
265
367
304
618
547
Note: Ranked by data for 2005.
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 2005 by dollar amount, the top six were office machines and automatic data
processing machines, telecommunications and sound equipment, miscellaneous
manufactured articles, apparel and accessories, electrical machinery, and furniture
and bedding. The value of U.S.-imports of PRC office and data processing machines
alone ($42.2 billion) exceeded total U.S. exports to China in 2005 ($41.8 billion).
While U.S. imports in all these categories have increased, the most dramatic
percentage changes have been not in traditional labor-intensive industries but in
sectors that encompass advanced technology, such as office and data processing

---

CRS-18
machines (up 284% between 2000 and 2005), telecommunications and sound
equipment (245%), and general industrial machinery (234%).
Figure 8. Top Six Imports from China by Industry, 1994-2005
$Billions
200
150
100
50
Office Machines
Telecom. Equip.
Apparel
Electrical Machinery
Furniture
Miscell. Manufactures
0
94
95
96
97
98
99
2000
1
2
3
4
5
Year
Source: U.S. Department of Commerce

---

CRS-19
Table 3. Top Twenty U.S. Imports from China, 1997-2005
(millions of dollars)
Category
1997
1998
1999
2000
2001
2002
2003
2004
2005
Office Machines, Data Processing
5,019
6,329
8,239
10,980
10,763
15,230
23,646
35,620
42,242
Telecom and Sound Equip.
5,126
6,405
7,382
9,812
10,118
14,144
16,937
24,388
34,249
Misc. Manufactured Articles
14,155
15,872
17,291
19,445
19,763
23,494
26,287
29,505
33,573
Apparel and Accessories
7,406
7,133
7,351
8,473
8,866
9,538
11,381
13,607
19,931
Electrical Machinery, Parts, and Appliances
4,877
5,707
7,022
9,037
9,110
10,217
11,875
15,270
18,102
Furniture and Bedding
1,545
2,183
3,261
4,476
5,018
6,954
8,749
10,910
13,187
Footwear
7,354
8,016
8,438
9,206
9,758
10,241
10,546
11,350
12,721
Manufactures of Metals
1,816
2,238
2,878
3,651
4,119
5,219
6,302
8,257
10,110
General Industrial Machinery
1,180
1,449
1,833
2,087
2,414
3,259
41,213
5,528
7,007
Textile Yarn, Fabrics
1,369
1,432
1,583
1,816
1,854
2,501
3,365
4,253
5,605
Travel Goods, Handbags
1,917
1,942
1,974
2,214
2,171
2,741
3,319
4,044
4,658
Road Vehicles
574
731
923
1,800
1,406
1,796
2,373
3,265
4,170
Building Fixtures/Fittings
1,194
1,444
2,073
2,555
2,377
2,962
3,202
3,700
4,143
Nonmetallic Mineral Manufactures
1,216
1,441
1,681
2,059
2,165
2,431
2,624
2,953
3,510
Professional & Scientific Instruments
634
715
837
1,025
1,177
1,301
1,666
2,180
2,490
Iron and Steel
314
398
349
623
439
441
483
1,609
2,354
Photographic Optical Equip, Watches, Clocks
1,211
1,400
1,600
2,016
1,935
1,842
2,030
2,248
2,176
Misc. Low-Valued Items
282
425
586
759
784
957
1,229
1,652
2,068
Cork and Wood (Non-Furniture)
335
445
568
710
792
990
1,162
1,612
2,006
Organic Chemicals
335
337
392
467
488
564
772
1,071
1,600
Power Generating Machinery
314
354
408
505
553
694
842
1,112
1,573
Paper Products
310
401
471
611
627
792
1,022
1,263
1,535
Note: Ranked by data for 2005.
Source: U.S. Department of Commerce, International Trade Commission.

---

CRS-20
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, which reflect China’s foreign
investment and growing technological sophistication. 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-21
Table 4. U.S. Balance of Trade with China by Sector, 2003-2005
(millions of dollars)
2003
2004
2005
Total China
-123,960
161,977
201,625
Major U.S. Deficit Sectors (HTS
Categories)
Machinery/Mechanical Appliances
-25,262
-37,628
-46,375
Electrical Machinery
-24,007
-34,113
-46,249
Toys and Sports Equipment
-16,070
-17,163
-19,074
Furniture and Bedding
-11,739
-14,339
-16,942
Footwear
-10,528
-11,318
-12,679
Woven Apparel
-5,484
-6,606
-10,220
Knit Apparel
-3,192
-4,092
-6,553
Leather Art; Saddlery; Bags
-5,040
-5,708
-6,247
Articles of Iron and Steel
-3,086
-4,376
-5,886
Plastic Articles
-3,032
-3,402
-4,380
Misc. Textile Articles
-2,353
-3,052
-3,953
Vehicles, Not Railway
-1,947
-2,729
-3,268
Misc. Art of Base Metal
-1,414
-1,809
-2,243
Precious Stones and Metals, Pearls
-1,391
-1,714
-2,065
Wood and Articles of Wood
-1,019
-1,454
-1,847
Tools, Cutlery, of Base Metals
-1,373
-1,554
-1,774
Optical, Medical Instruments
-1,650
-1,704
-1,729
Rubber and Rubber Articles
-698
-1,036
-1,551
Miscellaneous Manufactures
-1,023
-1,203
-1,404
Ceramic Products
-1,112
-1,203
-1,316
Artificial Flowers, Feathers
-1,091
-1,109
-1,145
Books, Newspapers, Manuscripts
-653
-892
-1,130
Major U.S. Surplus Sectors (HTS
Categories)
Aircraft, Spacecraft
2,388
1,870
4,296
Misc. Grain, Seed, Fruit
2,787
2,260
2,165
Cotton and Cotton Fabrics
587
1,260
1,215
Wood pulp, Etc.
599
752
990
Hides and Skins
477
527
624
Copper and Articles Thereof
436
344
545
Ores
34
105
373
Iron and Steel
879
45
336
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-22
The sectors in which the United States runs a trade surplus with China mirror
U.S. competitive advantages and include aircraft, agricultural products, and cotton
fabrics. In 2005, U.S. trade surpluses with China in aircraft, copper, iron ores, and
iron and steel rose dramatically.
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 relatively small.
Iron and Steel. In iron and steel products, China is becoming a major
exporter to the United States. In 2005, China was the fourth largest foreign supplier
of iron and steel products to the United States (surpassing Russia, South Korea,
Germany, and Japan), up from seventh place in 2003. In 2005, China also bought
$445 million worth of iron and steel products from the United States, making it the
third largest market for U.S. exports of iron and steel. In 2005, the United States
incurred a trade deficit with China in the SITC 67 category (iron and steel), which
includes semi-finished products, tubes and pipes, iron and steel rods, and ferroalloys.
However, the United States attained a trade surplus with China in the HTS 72
category (iron and steel), which includes more items in “primary form.”

---

CRS-23
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, 1991, 2000-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
EU15
3,303
3,637
3,041
2,621
4,697
5,828
Canada
1,504
2,437
2,981
2,885
3,979
4,699
Mexico
357
1,021
1,340
1,334
2,530
2,738
China
71
439
441
490
1,610
2,340
Japan
2,097
1,213
991
799
1,072
1,468
Korea
574
815
687
505
1,031
1,374
Taiwan
154
346
290
219
803
735
ASEAN
65
191
193
161
395
406
Hong Kong
2
2
3
2
3
10
Rest of World
1,691
3,657
4,469
3,929
10,204
9,034
World
9,818
13,758
14,436
12,945
26,324
28,632
Source: U.S. Department of Commerce

---

CRS-24
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 4.5% of U.S. imports in this category in 2005.
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
EU15
6,786
9,511
8,463
9,586
11,656
13,419
Japan
3,340
4,479
4,217
4,445
6,105
7,019
Canada
1,384
2,297
2,294
2,556
3,010
3,482
China
23
331
485
791
1,069
1,415
Mexico
139
537
490
578
862
1,241
Korea
69
305
325
467
746
1,159
Taiwan
313
626
638
623
730
684
ASEAN
13
101
113
145
250
287
Hong Kong
18
12
17
15
18
17
Rest of World
868
1,314
1,373
1,614
2,049
2,464
World
12,953
19,513
18,415
20,820
26,495
31,187
Source: U.S. Department of Commerce

---

CRS-25
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, surpassing
ASEAN. Imports of such products from China rose by over 75% between 2003 and
2005 and now account for 42% of U.S. imports in this category. Office machines
and computers from other East Asian countries — Japan, Taiwan, and South Korea
— 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 2005 were
China, Malaysia, Japan, Mexico, and Singapore.
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
117
10,761
15,230
23,612
35,579
42,169
ASEAN
5,150
20,676
22,043
21,571
22,460
23,473
Japan
11,007
11,055
9,464
8,978
9,282
8,936
Mexico
706
10,377
8,828
7,516
7,726
7,075
Taiwan
3,084
8,751
8,659
6,996
6,132
4,879
EU15
2,461
4,676
4,505
4,815
4,810
4,516
Korea
1,347
4,657
4,632
3,779
3,885
3,104
Canada
1,893
2,942
1,825
1,644
1,865
1,966
Hong Kong
809
276
392
328
304
210
Rest of World
297
1,729
1,342
2,947
1,492
2,015
World
26,871
75,900
76,920
80,542
93,535
98,343
Source: U.S. Department of Commerce

---

CRS-26
Telecommunications and Sound Equipment. China’s share of U.S.
imports of telecommunications and sound equipment has risen to 33%. Such imports
from China rose from $1.1 billion in 1990 to $34 billion in 2005. Imports of these
products from elsewhere in Asia, particularly from ASEAN countries, have also been
rising rapidly. The largest suppliers of telecommunications and sound equipment to
the United States in 2005 were China, Mexico, Malaysia, Japan, and South Korea.
Figure 12. 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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
1,142
10,062
14,144
16,723
24,311
34,140
Mexico
2,302
15,765
14,483
14,239
17,475
18,840
ASEAN
3,122
8,548
9,514
10,218
11,779
17,114
Korea
1,632
6,001
6,353
7,955
10,942
8,214
Japan
9,061
8,577
8,473
8,889
9,967
9,707
EU15
890
3,883
4,559
4,051
3,707
4,382
Canada
972
4,533
3,543
3,053
3,435
4,103
Taiwan
1,426
2,361
2,137
2,655
3,261
4,125
Hong Kong
478
224
357
522
647
672
Rest of World
322
2,446
2,264
2,363
1,941
2,637
World
21,347
62,400
65,827
70,668
87,465
103,934
Source: U.S. Department of Commerce

---

CRS-27
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 18% of such imports in 2004, China has become a significant
supplier — surpassing the EU, Japan, and ASEAN. Mexico remains the leading
foreign supplier.
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
Mexico
4,406
16,290
16,930
17,547
19,120
20,671
China
652
9,047
10,217
11,808
15,197
17,980
EU15
4,898
11,009
10,881
11,462
12,314
13,360
ASEAN
4,644
13,748
12,427
11,308
11,557
11,736
Japan
8,658
11,941
9,406
8,713
10,251
10,665
Canada
3,323
5,871
5,025
4,920
5,619
6,210
Taiwan
2,180
5,878
5,296
5,160
6,170
6,077
Korea
2,504
5,194
5,150
5,105
5,992
5,437
Hong Kong
792
1,050
881
585
637
593
Rest of World
1,080
4,112
4,359
4,916
5,414
5,560
World
33,137
84,140
80,572
81,524
92,271
98,289
Source: U.S. Department of Commerce

---

CRS-28
Road Motor Vehicles. China is the world’s third largest auto market and
fourth largest auto producer. China’s automobile sector has absorbed heavy foreign
investment — roughly 70% of the country’s car market is held by Chinese-foreign
joint ventures such as Shanghai General Motors (GM), Shanghai Volkswagen, and
First Auto Works-Toyota — and is aimed primarily at Chinese buyers.35 China
became a net exporter of vehicles for the first time in 2005, with exports of 172,800
vehicles and imports of 161,900 units. Most of China’s vehicle exports are sold in
Middle Eastern, North African, and South American countries. In addition, China
has become a major supplier of motorcycles to Southeast Asia. Chinese auto makers
Geely and Chery reportedly have plans to begin exporting passenger cars to the
United States in 2007 or 2008.36
Currently, 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. C h i n a
has become an important supplier of auto parts to the United States, with $2 billion
in selected auto parts in 2005, but trails Canada ($11.8 billion), Japan ($8.8 billion),
Mexico ($7.7 billion), and Germany ($2.3 billion). China exported $290 million
worth of motorcycles to the United States in 2005, accounting for 8% of U.S.
motorcycle imports compared to Japan’s 73%.
China is expected to continue to lower tariffs on imported automobiles, to 25%
in 2006, pursuant to China’s WTO accession agreement, although many non-tariff
barriers reportedly remain.37
35 In 2005, GM sold more than 650,000 vehicles in China compared to Volkswagen, with
sales of 500,000 cars, and Toyota, with 179,000 units. “Toyota in China: Full Speed
Ahead,” BusinessWeek Online, March 9, 2006.
36 “Chinese Automaker Geely Sets Sights on Exports to U.S.” Associated Press Newswires,
January 11, 2006.
37 “MOC: Tariff Cut to Put Little Effect on Imported Car Price next Year,” Xinhua News
Agency, December 19, 2005.

---

CRS-29
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
Canada
26,094
50,477
52,050
52,448
58,832
61,332
Japan
29,839
41,429
45,449
43,178
45,033
48,867
EU15
12,270
28,022
31,043
35,975
37,813
39,958
Mexico
4,084
26,246
26,181
25,222
26,114
26,744
Korea
1,275
6,778
7,382
8,503
10,773
10,187
59
1,404
1,796
2,369
3,267
4,198
China
Taiwan
871
1,124
1,239
1,387
1,522
1,804
ASEAN
88
247
280
297
359
432

Hong Kong
7
13
14
38
43
39
Rest of World
930
2,892
3,338
4,271
4,412
3,853
World
75,517
158,632
168,772
173,688
188,168
197,414
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 main factor. The PRC accounted for over half such imports in
2005, although total imports of such products from China amounted to only $4
billion, making it the 13th largest U.S. import from China.

---

CRS-30
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
94
2,383
2,962
3,199
3,697
4,146
Mexico
117
903
961
1,036
1,132
1,300
Canada
80
572
598
617
693
762
EU15
205
329
319
356
428
497
Taiwan
495
156
152
151
154
142
ASEAN
27
116
106
115
121
137
Hong Kong
47
70
77
80
73
59
Japan
28
59
36
41
49
52
Korea
61
32
36
42
37
37
Rest of World
78
275
319
362
422
464
World
1,232
4,895
5,566
5,999
6,806
7,596
Source: U.S. Department of Commerce

---

CRS-31
Furniture. In U.S. imports of furniture and related parts, China has become
a dominant supplier. The PRC accounted for over 43% of U.S. furniture imports in
2005. U.S. imports of furniture from China now exceed the combined U.S. imports
from Canada and Mexico, which were the leading foreign suppliers of furniture until
the late 1990s. In 2004, the Bush Administration imposed anti-dumping penalties
on approximately 500 furniture manufacturers in China.
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
145
5,017
6,954
8,742
10,905
13,179
Canada
1,209
4,411
4,423
4,551
5,007
5,126
Mexico
578
3,212
3,824
4,275
4,316
4,297
ASEAN
331
1,492
1,753
1,886
2,303
2,800
EU15
1,174
2,309
2,321
2,489
2,491
2,371
Taiwan
1,009
765
794
748
753
716
Japan
162
141
107
135
181
210
Korea
67
75
75
69
68
111
Hong Kong
29
98
90
109
97
82
Rest of World
299
1,081
1,219
1,289
1,557
1,691
World
5,003
18,601
21,560
24,293
27,678
30,583

---

CRS-32
Source: U.S. Department of Commerce
Travel Goods and Handbags. China has become the principal supplier of
imported travel goods, handbags, and similar items, accounting for nearly 75% of
U.S. imports of such merchandise in 2005. 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 42st in total
Figure 17. 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
customs value.
Table 13. U.S. Imports of Travel Goods, Handbags, (SITC 83)
from Selected Countries and Country Groups, 1990, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
692
2,211
2,741
3,136
3,936
4,504
EU15
270
463
476
602
715
790
ASEAN
114
836
538
372
340
275
Hong Kong
50
46
52
85
95
92
Mexico
46
104
87
69
63
54
Canada
17
39
35
37
35
36
Taiwan
406
129
52
79
47
32
Korea
446
106
56
39
31
21
Japan
9
7
7
8
12
12
Rest of World
121
384
292
233
248
262
World
2,171
4,325
4,336
4,660
5,522
6,078

---

CRS-33
Source: U.S. Department of Commerce
Apparel and Clothing. U.S. imports of apparel and clothing accessories
from China have been rising, reaching 26% of U.S. imports in 2005. According to
some estimates, more than 80% of Chinese apparel exports are produced by joint
ventures, many of them involving East Asian investment.38 Global quotas on
imported textiles and apparel expired on January 1, 2005, pursuant to the Multi-Fiber
Agreement, resulting in a surge in U.S. garment imports from China, which increased
by 46% in 2005. Other nations with large gains in the U.S. apparel market were
India (up 33%), Indonesia (20%) Bangladesh (20%), and Cambodia (20%).
Although wages for low skill labor in China reportedly are rising relative to other
developing countries, China’s clothing manufacturers retain competitive advantages
such as high labor productivity, “vertical integration” — the ability to produce all
manufacturing inputs domestically — and developed infrastructure. In November
2005, the United States and the PRC signed a three-year agreement on textiles trade
which imposes quotas on 21 types of Chinese textiles and clothing but which allows
for a progressive increase in U.S. imports of apparel products from China through
2008.
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
38 Jiang Jingjin, “China Not the Only Beneficiary,” China Daily (China Business Weekly),
April 5, 2004.

---

CRS-34
Table 14. U.S. Imports of Apparel and Clothing Accessories
(SITC 84) from Selected Countries and Country Groups,
1990, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
3,422
8,852
9,538
11,341
13,567
19,888
ASEAN
3,404
9,581
10,020
11,773
12,157
13,043
Mexico
709
8,127
7,731
7,199
6,943
6,321
Hong Kong
3,974
4,282
3,928
3,760
3,919
3,553
EU15
1,790
2,584
2,473
2,564
2,586
2,444
Canada
247
1,764
1,799
1,740
1,692
1,468
Korea
3,244
2,354
2,206
1,925
1,936
1,253
Taiwan
2,475
1,907
1,664
1,690
1,626
1,203
Japan
158
170
205
252
325
121
Rest of World
5,891
24,168
24,150
25,907
27,438
26,983
World
25,314
63,789
63,714
68,060
72,189
76,277
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 suppliers are
Italy, Brazil, and Vietnam.
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-35
Table 15. U.S. Imports of Footwear (SITC 85) from Selected
Countries and Country Groups, 1990, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
China
1,475
9,766
10,241
10,546
11,347
12,654
EU15
1,523
1,950
1,826
1,763
1,722
1,558
ASEAN
579
1,185
1,237
1,184
1,259
1,525
Mexico
165
311
278
275
242
247
Canada
53
78
67
64
76
93
Taiwan
1,528
75
73
73
80
69
Hong Kong
109
81
67
60
86
52
Korea
2,558
103
65
50
51
45
Japan
5
2
2
2
2
3
Rest of World
1,543
1,698
1,523
1,542
1,632
1,588
World
9,538
15,249
15,379
15,559
16,497
17,834
Source: U.S. Department of Commerce
Professional, Scientific, and Controlling Instruments. China is a
minor supplier of U.S. imports of professional, scientific and controlling instruments,
supplying 8% of U.S. imports in this category in 2005. Over two-thirds of such
imports originate in the European Union, Mexico, and Japan.

---

CRS-36
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
EU15
2,310
6,887
6,543
7,744
10,225
10,802
Mexico
513
3,895
4,436
5,090
5,082
5,371
Japan
1,494
3,561
2,902
3,177
4,016
3,887
China
74
1,172
1,301
1,660
2,176
2,483
Canada
527
1,793
1,575
1,406
1,611
1,833
ASEAN
152
1,027
1,037
1,139
1,448
1,571
Taiwan
176
372
393
450
458
472
Korea
89
152
156
153
177
230
Hong Kong
82
55
67
70
67
79
Rest of World
604
2,287
2,400
2,675
3,101
3,433
World
6,021
21,201
20,810
23,564
28,361
30,161
Source: U.S. Department of Commerce
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 2005, China accounted for 17.5% of U.S. imports

---

CRS-37
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, 2001-2005
(millions of dollars)
1990
2001
2002
2003
2004
2005
Japan
2,668
3,848
3,309
3,138
3,140
3,082
EU15
1,619
2,439
2,535
2,612
2,716
2,807
China
191
1,908
1,842
2,001
2,239
2,153
ASEAN
199
650
664
587
614
646
Mexico
128
648
634
555
665
494
Canada
180
545
414
461
428
469
Taiwan
334
282
288
280
265
258
Hong Kong
526
236
200
164
182
178
Korea
127
168
150
134
124
127
Rest of World
574
1,348
1,353
1,510
1,797
2,072
World
6,546
12,072
11,389
11,442
12,170
12,286
Source: U.S. Department of Commerce

---

CRS-38
Foreign Direct Investment in China
Fueling China’s export boom is an unprecedented infusion of foreign capital in
the manufacturing sector.39 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.40 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 Islands41
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.
39 For further discussion of China’s economy and foreign investment, see CRS Issue Brief
IB98014, China’s Economic Conditions, by Wayne Morrison.
40 Mainland subsidiaries in Hong Kong and Macao can take advantage of investment
incentives for foreign companies on the PRC mainland.
41 Many foreign firms, including U.S. companies, are registered in the Virgin Islands,
Cayman Islands, and Western Samoa for tax purposes.

---

CRS-39
Appendix
Table A1. China’s Merchandise Trade with the World, 1984-2005
(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
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
593,647
560,811
32,831
527,370
794,480
-267,110
2005
762,326
660,221
102,105
– – –
Note: Summation of data reported by 109 of China’s trading partner countries in 1983 growing to 156
countries reporting in 2004.
Sources: Chinese data: PRC General Administration of Customs and Global Trade Atlas. World
Data: International Monetary Fund, Direction of Trade Statistics Yearbook.

---

CRS-40
Table A2. U.S. Merchandise Trade with China and China’s
Merchandise Trade with the United States, 1984-2005
(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
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
2005
41,836
243,462
-201,626
162,938
48,734
114,204
Sources: U.S. data from U.S. Department of Commerce. Chinese data from PRC General
Administration of Customs and Global Trade Atlas.

---

CRS-41
Table A3. Japan’s Merchandise Trade with China and China’s
Merchandise Trade with Japan, 1984-2005
(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
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
2005
79,972
108,515
-28,543
84,097
100,467
-16,370
Sources: IMF, Direction of Trade Statistics Quarterly; Global Trade Atlas; PRC, General
Administration of Customs.

---

CRS-42
Table A4. European Merchandise Trade with China and China’s
Merchandise Trade with the European Union, 1984-2005
(millions of dollars)
EU-15 Trade with China
China’s Trade with the EU-15
(EU data)
(Chinese Data)
Year
EU
EU
EU
China
China
China
Exports
Imports
Balance
Exports
Imports
Balance
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
32,208
77,495
-45,227
48,184
38,552
9,632
2003
44,217
108,562
-64,345
72,457
53,112
19,345
2004
57,773
147,111
-89,338
99,843
68,011
31,832
2005
– – –
134,872
71,694
63,178
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; Global Trade Atlas; PRC. General
Administration of Customs.

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CRS-43
Table A5. Major Country Merchandise Exports to China, Imports from China, and Trade Balances with China,
2004 and 2005
(billions of dollars)
Trading Partner Data
Chinese Data
Partner
2004
2005
2004
2005
Exp
Imp Bal
Exp
Imp
Bal
Exp
Imp
Bal
Exp
Imp
Bal
U.S.
34.7
196.6
-161.9
41.8
243.4
201.6
44.6
124.9
-80.3
48.7
162.9
-114.2
Japan
73.9
94.4
-20.5
79.9
108.5
-28.5
94.2
73.5
20.7
100.4
84.1
16.3
EU-15
57.7
146.7
-89.0
– –

–
68.0
99.8
-31.8
71.7
134.8
-63.1
Hong Kong
114.2
118.0
-3.8
– –
–
11.8
101.0
-89.2
12.2
124.5
-112.3
Taiwan a
44.9
16.7
28.2
– –
–
64.7
13.5
51.2
74.6
16.7
57.9
S. Korea
54.9
29.2
25.7
– –
–
62.0
27.8
34.2
76.8
35.1
41.7
Germany
26.0
38.4
-12.4
– –
–
30.0
23.7
6.3
30.6
32.5
-1.9
Singapore
15.4
16.2
-0.8
–
–
–
14.0
12.6
1.4
16.5
16.7
-0.2
U.K.
4.3
19.1
-14.8
– –
–
4.7
14.9
-10.2
5.5
18.9
-13.4
France
6.7
14.5
-7.8
– –
–
7.6
9.9
-2.3
9.0
11.6
-2.6
Sources: IMF, Direction of Trade Statistics Quarterly; 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-44
Table A6. U.S. Merchandise Trade Balances with Selected Asian Developing Nations, 1984-2005
(millions of dollars)
Year
China
Indonesia
S. Korea
Malaysia
Philippines
Taiwan
Thailand
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
-2,072
-12,866
-11,214
2005
-201,625
-8,971
-16,109
-23,252
-2,355
-12,788
-12,569
Source: U.S. Department of Commerce, International Trade Commission.

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