Order Code RS22640
April 10, 2007
What’s the Difference? — Comparing U.S. and
Chinese Trade Data
Michael F. Martin
Analyst in Asian Political Economy
Foreign Affairs, Defense, and Trade Division
Summary
There is a large and growing difference between the official trade statistics released
by the United States and the People’s Republic of China. According to the United
States, the 2006 bilateral trade deficit with China was $232.5 billion. According to
China, its trade surplus with the United States was $144.3 billion — $88.2 billion less.
This paper examines the differences in the trade data from the two nations in two
ways. First, it compares the trade figures at the two digit level using the Harmonized
System to discern any patterns in the discrepancies between the U.S. and Chinese data.
This comparison reveals that over two-thirds of the difference in the value of China’s
exports to the United States is attributable to five types of goods. The second approach
to examining the differing trade data involves a review of the existing literature on the
technical and non-technical sources of the trade data discrepancies. This report will not
be updated.
U.S. trade with the People’s Republic of China (China) is becoming increasingly
contentious as U.S. bilateral trade deficit rises.1 Debate over this trade deficit is hampered
because of disagreement between the two countries on how large the deficit actually is.
According to U.S. figures, the 2006 bilateral trade deficit with China was $232.5 billion.
However, according to the Chinese, its trade surplus with the United States was $144.3
billion — $88.2 billion less than the U.S. figure (see Table 1). The difference amounts
to over one quarter of total trade between the two nations using the U.S. data as the base,
or nearly a third of total trade using China’s figures as a base.
The size of the bilateral trade deficit also is an issue in proposed legislation
addressing trade relations with China. For instance, H.R. 1002, which would impose
tariffs on Chinese imports unless China revalues its currency, explicitly lists the U.S.
1 For a more detailed discussion of key Sino-U.S. trade issues, see CRS Report RL33536, China-
U.S. Trade Issues, by Wayne Morrison, and CRS Report RL31403, China’s Trade with the
United States and the World, by Thomas Lum and Dick K. Nanto.

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figures for the bilateral trade deficit with China among its findings. Similarly, H.R. 782
and S. 364, which would classify “exchange rate misalignment” or “exchange rate
manipulation” as a countervailable export subsidy, both cite bilateral trade deficits as
evidence of exchange rate misalignment or manipulation.
Comparison of U.S. and Chinese Trade Data
Table 1 lists the official trade statistics from the United States and China for the
years 2001 to 2006, using comparable data.2 According to both countries, the U.S. trade
deficit with China is large and growing. Where the two sides differ is how big the deficit
is and how fast it is growing. From the U.S. perspective, its bilateral trade deficit with
China more than trebled in value over the last six years, from just over $83 billion in
2001 to over $250 billion in 2006. However, from the Chinese view, its bilateral trade
surplus with the United States increased five fold over the last six years, from about $28
billion in 2001 to over $144 billion in 2006.
Table 1. U.S. and Chinese Trade Figures, 2001-2006
(billion dollars)
U.S. Trade Figures
Chinese Trade Figures
Year
Exports to China
Imports from
Exports to
Imports from
China
United States
United States
2001
19.182
102.278
54.283
26.202
2002
22.128
125.192
69.951
27.230
2003
28.368
152.436
92.474
33.861
2004
34.744
196.682
124.948
44.679
2005
41.925
243.470
162.939
48.735
2006
55.224
305.788
203.516
59.222
Source: Global Trade Atlas, U.S. International Trade Commission.
Table 1 reveals that most of the discrepancy between the trade data from the two
nations stems from significantly different figures for China’s exports to the United States.
While the difference between the U.S. and Chinese figures for U.S. exports to China has
been less than $10 billion over the last six years, China’s figures for its exports to the
United States differed by $48 billion in 2001 and $102 billion in 2006.
Delving into the Data: Examining HS Code
The most widely used system for classifying traded goods is the Harmonized
Commodity Description and Coding System, commonly referred to as the Harmonized
System or simply HS Code. Every product traded is classified into a 10-digit code. The
first two digits of the products code corresponds to one of the 98 HS “chapters,” that
classify all goods in general categories. The U.S. International Trade Commission
maintains the U.S. version of the HS Code, officially called the “Harmonized Tariff
2 In this report, export data are valued “free on board,” or F.O.B.; import data are valued
including Cost, Insurance, and Freight, or C.I.F.

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Schedule of the United States,” or HTS. Since both the United States and China release
use the same HS chapters, it is possible to compare the trade data at this level.
Table 2 lists in rank order the top ten HS chapters according to the difference
between the figures for U.S. imports from China and Chinese exports to the United States
for 2006. In all 10 cases, the U.S. import figures exceeded China’s export figures.3 The
top five HS chapters — footwear (64), machinery (84), electrical machinery (85),
furniture (94), and toys and sporting goods (95) — account for over two-thirds (68.5%)
of the difference between the U.S. and Chinese figures. The top 10 chapters collectively
account for 83.0% of the difference.
Table 2. Top 10 Discrepancies for U.S. Imports from China, 2006
(billion dollars)
U.S. Imports
China’s Exports
HS Chapter
from China
to U.S.
Difference
(U.S. data)
(China Data)
Electrical Machinery (85)
66.930
46.179
20.751
Machinery (84)
64.277
46.374
17.903
Toys and Sporting Goods (95)
22.407
8.640
13.767
Furniture (94)
22.143
11.558
10.585
Footwear (64)
14.667
7.606
7.602
Woven Apparel (62)
12.502
7.881
4.621
Leather Goods (42)
7.374
3.620
3.754
Plastic (39)
8.274
5.658
2.616
Knitted Apparel (61)
8.440
6.300
2.141
Iron & Steel Products (73)
9.307
7.664
1.643
Source: Global Trade Atlas, U.S. International Trade Commission.
These 10 chapters also ranked high according to both countries in terms of their
absolute value of trade. The first five chapters listed in Table 2 were also the top five
ranked chapters in terms of the value of imports from China, according to the United
States, and accounted for 62.3% of the total value of imports in 2006. The first four
sources for the discrepancies were also the top four sources of exports to the United
States, according to China. Of the 10 chapters listed in Table 2, nine were among the top
10 sources of China’s exports (leather goods ranked 13th among the HS chapters)4 and all
10 were among the top10 in rank order, according to the United States — but not in the
same order. The 10 chapters listed above provided 77.3% of the value of what the United
States said it imported from China in 2006, and 74.4% of what China said it exported to
the United States.
3 The Chinese export figure for chapter 86, “railway and traffic signal equipment,” exceeded the
U.S. import figure by $1.185 billion in 2006.
4 Non-railway vehicles (chapter 87) ranked ninth among the chapters.

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On the other side of the trade equation, there were three chapters where China’s
imports exceeded U.S. exports by more than $1 billion, and one chapter where U.S.
exports exceeded Chinese imports by more than $1 billion. China’s imports from the
United States of machinery (84), electrical machinery (85), and optical and medical
equipment (90) were more than $1 billion greater than the U.S. exports to China.
However, U.S. exports to China of iron and steel (72) were more than $1 billion greater
than China’s imports from the United States.
It is also worth noting that on both sides of the trade balance equation, the greatest
differences in the official trade statistics of the two nations occurred in the same HS
chapters — machinery (84) and electrical machinery (85). The discrepancies between the
official trade statistics for these two types of goods have been consistently large for flows
in both directions since 2001. This indicates a systemic difference in the evaluation of the
bilateral trade of these goods.
Explaining the Differences: Summary of the Literature
The question as to why China’s official statistics are routinely much lower in value
than the official U.S. trade statistics has been and continues to be the subject of analysis
by scholars, government officials and other interested parties. The following is a short
review of some of the key explanations provided in this literature, categorized into
“technical” and “non-technical” explanations. “Technical” explanations refer to
procedural or administrative causes for the discrepancies; “non-technical” explanations
include causes arising from non-procedural or administrative sources.
Technical Explanations
Definitions of Exports and Imports. In its official statistics, China evaluates
exports using the more commonly used “free on board,” (F.O.B.) definition5 and the “cost,
insurance, and freight, (C.I.F.) definition6 to evaluate imports. The United States,
however, reports its exports evaluated by using the “freight along side” (F.A.S.)
definition7 and values imports using a customs definition.8 As a result, a direct
comparison of the official U.S. and Chinese trade balances reported in the media is
misleading. In this report, U.S. trade figures are presented using the F.O.B. and C.I.F.
definitions, thereby raising the values of exports, imports and the trade deficit, and
increasing the discrepancy in the trade figures of the two nations.
Definition of Territory. The United States includes Puerto Rico and the U.S.
Virgin Islands in its trade data; China does not, a comparatively minor source of
difference in the trade figures.
5 “Free on board” includes the cost of getting the goods to port and loading them onto the ship.
6 The C.I.F. definition adds the cost of insurance and shipping (freight) to the value of the
imported goods.
7 Unlike F.O.B., F.A.S. does not include the costs of clear the goods for export and loading the
goods. As a result, the FAS value of a shipment is less than its FOB value.
8 The customs definition only includes the actual cost of the goods; it does not include the cost
of insurance and freight. As a result the customs value of a shipment is less than its CIF value.

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Timing. Because of the distance between China and the United States, it takes time
between the export of the goods from China and their import in the United States. Goods
in transit at the end of the year are counted as exports by China, but not as imports by the
United States. However, the lag between shipments occurs at the beginning and the end
of the year, and thus minimize the effect of timing on the overall trade balance difference.
Declaration of Country of Origin. The current practice of U.S. Customs is to
rely on the declaration of the importer to determine the country of origin. Some analysts
believe that importers are misidentifying a significant amount of imports as Chinese.
Exchange Rates. Because China’s currency, the renminbi (people’s money), is
allowed to fluctuate within a small range against a basket of foreign currencies, the
exchange rate between the renminbi and the U.S. dollar changes over time. The value of
a shipment may change between the date it leaves China and it arrives in the United States
due to changes in the exchange rate. Although the renminbi has appreciated against the
U.S. dollar over the last couple of years, exchange rate changes are not a major factor in
the discrepancy in the trade figures.
Non-Technical Explanations
Intermediation. Although estimates vary, most analysts agree that a large portion
of China’s exports arrive in the United States via a third party; Hong Kong being the most
commonly identified location.9 The intermediation of shipments raises two sources of
discrepancies. First, the exporter from China may not know that the goods will eventually
be shipped to the United States, and will list the third party (e.g. Hong Kong) as its
destination, but U.S. Customs will list the source of shipment as being China. Second, the
value of the shipment may change — with or without any actual change in the goods —
between its arrival in and departure from the third location. As a result, the Chinese export
value will be less than the U.S. import value.
Under-Invoicing. Some analysts believe that Chinese importers may intentionally
under value imports from the United States to lower the import tariff due on the shipment.
In addition, some analysts believe that Chinese exporters may intentionally under value
exports to the United States to maximize their net proceeds overseas for various tax and
regulatory reasons. Due to the “hidden nature” of under-invoicing, it is difficult to assess
how much this may be contributing to the differences in the trade data.
Implications for Congress
The release of the official U.S. trade figures for 2006 was soon followed by
expressions of concern about the bilateral trade deficit with China. Several congressional
committees have held or plan on holding hearings on the Sino-U.S. trade deficit and/or
trade relations with China. Also, a number of bills have been or may yet be introduced in
Congress with the express goal of reducing the U.S. trade deficit with China.
9 After adjusting for re-exports via Hong Kong, Fung, Lau and Xiong reduced the difference
between the U.S. and Chinese trade deficit for 2005 from $87.4 billion to $26.5 billion. Tong
estimated that adjustments for re-exports resulted in a $22 billion reduction in the trade balance
difference for 2003.

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China, however, does not accept the accuracy of the official U.S. figure for the Sino-
U.S. trade balance, and there are reasons for China’s opinion. China’s Foreign Ministry
spokeswoman, Jiang Yu, recently said, “Imbalances in China-U.S. trade are an objective
fact, but this is also related to the two sides’ different statistical methods.”10
Also, when considering means or actions designed to reduce the U.S. trade deficit
with China, it is useful to know which goods are the main sources of discrepancies
between Chinese and U.S. trade figures, and how important they are in the overall trade
flow between the two nations, so that “trade remedies” may be better targeted at the
“problem.” According to this report, the main problems appear to be in the trade figures
for electrical machinery, machinery, toys and sporting goods, and furniture.
For those causes of the differences resulting from data compilation — such as
misidentification of value or country of origin of imports — Congress may choose to
appropriate additional funding for the responsible U.S. agency and/or provide for training
or assistance to China’s customs services. In other cases, the information may be helpful
in persuading China to amend or alter its laws, regulations and policies pertaining to the
import or export of goods to the United States.
Selected Bibliography on the Differences Between
U.S. and Chinese Bilateral Trade Figures
Adjusted Estimates of United States-China Bilateral Trade Balances — An Update. K.C.
Fung, Lawrence J. Lau and Yangyan Xiong. June 2006. Stanford Center for
International Development, Working Paper No. 278.
Statistical Differences in Sino-US Trade Balance. February 12, 2007. China Online.
[http://chinaculture.about.com/library/china/whitepaper/blstrade2.htm]
The U.S.-China Bilateral Trade Balance: Its Size and Determinants. Robert C. Feenstra,
Wen Hai, Wing T. Woo, and Shunli Yao. May 1998. Paper presented at the UNDP-
HIID Conference on China’s Integration in the Global Economy, January 17, 1998.
The U.S.-China Trade Imbalance: How Big Is It Really? Sarah Y. Tong. March 2005.
China: An International Journal. Volume 3, No. 1, pp. 131-154.
10 Washington Trade Daily, February 16, 2007.

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