Order Code RS22640
Updated February 15, 2008
What’s the Difference? — Comparing U.S. and
Chinese Trade Data
Michael F. Martin
Analyst in Asian Trade and Finance
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 2007 bilateral trade deficit with China was $256.3 billion. According to
China, its trade surplus with the United States was $162.9 billion — $93.4 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 is
updated annually, after the release of official trade data by China and the United States.
U.S. trade with the People’s Republic of China (China) is becoming increasingly
contentious as the 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 official U.S. figures, China surpassed Canada as the largest
supplier of U.S. imports, running up a bilateral trade surplus of $256.3 billion in the
process. However, according to the Chinese, its trade surplus with the United States was
only $162.9 billion — $93.4 billion less than the U.S. figure (see Table 1).
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 official
U.S. figures for the bilateral trade deficit with China among its findings. Similarly, H.R.
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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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 2007, using official trade 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 seven years, from just over $83 billion in
2001 to over $256 billion in 2007. However, from the Chinese view, its bilateral trade
surplus with the United States increased nearly sixfold over the last seven years, from
about $28 billion in 2001 to nearly $163 billion in 2007.
Table 1. U.S. and Chinese Trade Figures, 2001-2007
(billion U.S. dollars)
U.S. Trade Figures
Chinese Trade Figures
Imports from
Exports to
Imports from
Year
Exports to China
China
United States
United States
(F.A.S.)
(Customs)
(F.O.B.)
(C.I.F.)
2001
19.235
102.280
54.277
26.204
2002
22.053
125.168
69.959
27.228
2003
28.418
152.379
92.510
33.883
2004
34.721
196.699
124.973
44.653
2005
41.837
243.462
162.939
48.735
2006
55.224
287.773
203.516
59.222
2007
65.238
321.508
232.761
69.861
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 seven years, China’s figures for its exports to the
United States differed by $48.0 billion in 2001 and $88.7 billion in 2007.
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
2 China values its export data using the “free on board,” or F.O.B. method and its imports are
valued using the “cost, insurance, and freight,” or C.I.F. method. The United States values its
exports using the “freight along side,” or F.A.S. method and its imports are valued using the
“Customs value” method. The implications of the different evaluation methods is discussed later
in this report.

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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
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 2007. 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, 2007
(billion dollars)
U.S. Imports
China’s Exports
HS Chapter
from China
to U.S.
Difference
(U.S. data)
(China Data)
Electrical Machinery (85)
76.735
56.015
20.720
Toys and Sporting Goods (95)
26.126
10.584
15.542
Machinery (84)
64.043
51.837
12.206
Furniture (94)
20.365
13.701
6.664
Footwear (64)
14.137
8.235
5.902
Woven Apparel (62)
13.407
8.895
4.512
Leather Goods (42)
7.234
4.011
3.223
Knitted Apparel (61)
10.564
7.829
2.735
Plastic (39)
8.256
6.046
2.210
Precious Stones (71)
2.788
1.297
1.491
Source: Global Trade Atlas, U.S. International Trade Commission.
Most of these 10 chapters also ranked high according to both countries in terms of
their absolute value of trade. The first six chapters listed in Table 2 were also the top six
ranked chapters in terms of the value of imports from China, according to the United
States, and accounted for 66.8% of the total value of imports in 2007. 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, eight were among the top
10 sources of China’s exports (leather goods ranked 13th and precious stones was 23rd
among the HS chapters)4 and nine were among the top10 in rank order, according to the
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 According to China’s export figures, iron and steel (chapter 73) ranked 6th and Non-railway
vehicles (chapter 87) ranked 9th among the chapters.

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United States (precious stones was 18th).5 The 10 chapters listed above provided 75.8%
of the value of what the United States said it imported from China in 2007, and 72.4% of
what China said it exported to the United States.
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 two chapters 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) and aircraft (chapter 88) 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, two of 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
Official Definitions of Exports and Imports. In its official statistics, China
evaluates exports using the more commonly used “free on board,” (F.O.B.) definition6 and
the “cost, insurance, and freight, (C.I.F.) definition7 to evaluate imports. The United
States, however, reports its exports evaluated by using the “freight along side” (F.A.S.)
definition8 and values imports using a customs definition.9 As a result, official U.S. trade
data places a lower value on both U.S. exports to China and imports from China than the
official Chinese data. In addition, direct comparisons of the official U.S. and Chinese
5 According to U.S. import figures, iron and steel (chapter 73) ranked 8th among the chapters.
6 “Free on board” includes the cost of getting the goods to port and loading them onto the ship.
7 The C.I.F. definition adds the cost of insurance and shipping (freight) to the value of the
imported goods.
8 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.
9 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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trade balances reported in the media are potentially misleading because the goods trades
are being evaluated using different methods. For more accurate direct comparisons, the
trade data for both nations should be determined by using the same definition, such as
general international convention of F.O.B. for exports and C.I.F. for imports.
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.
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 considered 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.10 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
10 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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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
Just as in past years, the release of the official U.S. trade figures for 2007 was soon
followed by expressions of concern about the U.S. bilateral trade deficit with China. Peter
Morici, a University of Maryland professor, reportedly made the following comment on
the U.S.-China bilateral trade balance, “A gap in exports compared to imports creates a
drain on demand for U.S. goods that will push us into a recession.”11
China, however, does not accept the accuracy of the official U.S. figure for the Sino-
U.S. trade balance. In 2007, China’s Foreign Ministry spokeswoman, Jiang Yu, said,
“Imbalances in China-U.S. trade are an objective fact, but this is also related to the two
sides’ different statistical methods.”12
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, and toys and sporting goods.
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, more detailed analysis of the
trade data 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.
11 David Goldman and Chris Isidore, “1st Annual Trade Gap Drop in 6 Years,” CNN Money,
February 14, 2008.
12 Washington Trade Daily, February 16, 2007.