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Accounting for the China–US Trade Imbalance: An Ownership‐Based Approach

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  • Yiping Xu
  • Guijun Lin
  • Huayu Sun

Abstract

This paper focuses on measuring the trade imbalance between China and the United States (US) within the framework of the ownership‐based approach. It extends the baseline model developed, respectively, by NAS, Julius, and BEA into a three‐country framework, consisting of the domestic economy, the foreign economy, and the rest of the world. The results of the study show that the non‐US foreign direct investment in China is mostly responsible for China's trade surplus with the US. As a result, China's ownership‐based trade surplus is surprisingly small relative to the conventional measure.

Suggested Citation

  • Yiping Xu & Guijun Lin & Huayu Sun, 2010. "Accounting for the China–US Trade Imbalance: An Ownership‐Based Approach," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 540-551, August.
    • Handle: RePEc:bla:reviec:v:18:y:2010:i:3:p:540-551
    DOI: 10.1111/j.1467-9396.2010.00882.x
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    References listed on IDEAS

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    1. Lardy,Nicholas R., 1992. "Foreign Trade and Economic Reform in China," Cambridge Books, Cambridge University Press, number 9780521414951, September.
    2. K. C. Fung, 1998. "Accounting for Chinese Trade: Some National and Regional Considerations," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 173-204, National Bureau of Economic Research, Inc.
    3. Yuefen Li, 2006. "Trade Balance: Numbers Can be Deceiving," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(3), pages 54-70, May.
    4. Fung, K. C. & Lau, Lawrence J., 2003. "Adjusted estimates of United States-China bilateral trade balances: 1995-2002," Journal of Asian Economics, Elsevier, vol. 14(3), pages 489-496, June.
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