Adjusted Estimates of United States-China Bilateral Trade Balances - An Update

Large differences exist between the official United States and Chinese data on trade balances between the two countries. In 2005, the U. S. merchandise trade deficit with China was US$201.6 billion according to United States Government data, but US$114.2 billion according to Chinese Government data, a discrepancy of US$87.4 billion. The objective of this paper is to provide updated adjusted estimates of the U. S.-China trade balances that are comparable so as to facilitate more objective policy discussions. Four adjustments are made to the export and import data of the two governments: (1) freight along side (f.a.s.)-free on board (f.o.b.) and cost, insurance and freight (c.i.f.)-f.o.b. conversions, (2) re-exports through Hong Kong (and elsewhere), (3) re-export markups and (4) trade in services. After all of these adjustments, our best estimate for the 2005 bilateral trade balance in goods and services combined is US$170.7 billion, in China's favor, which is much larger than the official Chinese balance of US$114.2 billion but also much smaller than the official U. S. balance of US$201.6 billion.