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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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    4. 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.
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