What’s the Difference?—Comparing U.S. and
Chinese Trade Data
Michael F. Martin
Analyst in Asian Trade and Finance
March 27, 2009
Congressional Research Service
7-5700
www.crs.gov
RS22640
CRS Report for Congress
P
repared for Members and Committees of Congress
What’s the Difference?—Comparing U.S. and Chinese Trade Data
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 2008 bilateral trade
deficit with China was $266.3 billion. According to China, its trade surplus with the United States
was $170.8 billion—$95.5 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.
Congressional Research Service
What’s the Difference?—Comparing U.S. and Chinese Trade Data
Contents
Comparison of U.S. and Chinese Trade Data ............................................................................... 1
Delving into the Data: Examining HS Code................................................................................. 2
Explaining the Differences: Summary of the Literature ............................................................... 4
Technical Explanations ......................................................................................................... 4
Official Definitions of Exports and Imports..................................................................... 4
Definition of Territory..................................................................................................... 4
Timing ............................................................................................................................ 4
Declaration of Country of Origin..................................................................................... 5
Exchange Rates............................................................................................................... 5
Non-Technical Explanations.................................................................................................. 5
Intermediation................................................................................................................. 5
Under-Invoicing.............................................................................................................. 5
Implications for Congress ........................................................................................................... 6
Selected Bibliography on the Differences Between U.S. and Chinese Bilateral Trade
Figures..................................................................................................................................... 6
Tables
Table 1. U.S. and Chinese Trade Figures, 2001-2008................................................................... 2
Table 2. Top 10 Discrepancies for U.S. Imports from China, 2008 ............................................... 3
Contacts
Author Contact Information ........................................................................................................ 7
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What’s the Difference?—Comparing U.S. and Chinese Trade Data
.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
U hampered because of disagreement between the two countries on how large the deficit
actually is. According to official U.S. figures, China has surpassed Canada as the largest supplier
of U.S. imports, running up a bilateral trade surplus of $266.3 billion in the process. However,
according to the Chinese, its trade surplus with the United States was only $170.8 billion—$95.5
billion less than the U.S. figure (see Table 1).
The size of the bilateral trade deficit also has been an issue in proposed legislation addressing
trade relations with China. For instance, H.R. 1002, which was introduced during the 110th
Congress, would have imposed tariffs on Chinese imports unless China revalues its currency. The
bill explicitly listed the official U.S. figures for the bilateral trade deficit with China among its
findings. Similarly, H.R. 782 and S. 364, also introduced in the 110th Congress, would have
classified “exchange rate misalignment” or “exchange rate manipulation” as a countervailable
export subsidy. Both bills cited 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
2008, 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 eight years, from just over $83 billion in 2001 to over $266 billion in 2008. However,
from the Chinese view, its bilateral trade surplus with the United States increased more than
sixfold over the last eight years, from about $28 billion in 2001 to nearly $171 billion in 2008.
1 For a more detailed discussion of key Sino-U.S. trade issues, see CRS Report RL33536, China-U.S. Trade Issues, by
Wayne M. Morrison, and CRS Report RL31403, China’s Trade with the United States and the World, by Thomas Lum
and Dick K. Nanto.
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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What’s the Difference?—Comparing U.S. and Chinese Trade Data
Table 1. U.S. and Chinese Trade Figures, 2001-2008
(billion U.S. dollars)
U.S. Trade Figures
Chinese Trade Figures
Imports from
Exports to
Imports from
Exports to China
China
United States
United States
Year
(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
2008 71.457
337.790 252.327 81.486
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 $10 billion or less over
the last eight years, China’s figures for its exports to the United States differed by $48.0 billion in
2001 and $85.5 billion in 2008.
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 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 2008. In all 10 cases,
the U.S. import figures exceeded China’s export figures. 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 (66.8%) of the difference between the U.S. and Chinese
figures. The top 10 chapters collectively account for 83.9% of the difference.
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What’s the Difference?—Comparing U.S. and Chinese Trade Data
Table 2. Top 10 Discrepancies for U.S. Imports from China, 2008
(billion dollars)
U.S. Imports
China’s Exports
from China
to U.S.
HS Chapter
(U.S. data)
(China Data)
Difference
Electrical Machinery (85)
80.348
58.387
21.961
Toys and Sporting Goods (95)
27.181
12.279
14.902
Machinery (84)
65.147
55.097
10.050
Footwear (64)
14.479
9.317
5.162
Furniture (94)
19.405
14.412
4.993
Woven Apparel (62)
13.317
9.101
4.216
Knitted Apparel (61)
10.683
7.291
3.392
Leather Goods (42)
7.386
4.220
3.166
Plastic (39)
8.937
6.354
2.583
Precious Stones (71)
2.706
1.400
1.306
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
65.1% of the total value of imports in 2008. 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 14th and
precious stones was 23rd among the HS chapters)3 and nine were among the top10 in rank order,
according to the United States (precious stones was 25th).4 The 10 chapters listed above provided
73.9% of the value of what the United States said it imported from China in 2008, and 70.5% of
what China said it exported to the United States.
On the other side of the trade equation, there were six chapters where China’s imports exceeded
U.S. exports by more than $1 billion, and four chapters where U.S. exports exceeded Chinese
imports by more than $1 billion. China’s imports from the United States of grains, seeds, and
fruits (12); chemical products (38); plastic (39); 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); copper (74); aluminum (76); and
aircraft (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
3 According to China’s export figures, iron and steel (chapter 73) ranked 6th and Non-railway vehicles (chapter 87)
ranked 9th among the chapters.
4 According to U.S. import figures, iron and steel (chapter 73) ranked 8th among the chapters.
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What’s the Difference?—Comparing U.S. and Chinese Trade Data
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.) 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, 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 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
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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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 few 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.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.
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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What’s the Difference?—Comparing U.S. and Chinese Trade Data
Implications for Congress
The release of the official U.S. annual trade figures has been frequently 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 2007 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.”10
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.”11
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.
10 David Goldman and Chris Isidore, “1st Annual Trade Gap Drop in 6 Years,” CNN Money, February 14, 2008.
11 Washington Trade Daily, February 16, 2007.
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Author Contact Information
Michael F. Martin
Analyst in Asian Trade and Finance
mfmartin@crs.loc.gov, 7-2199
Congressional Research Service
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