China's trade has three features: high incidence of re-exports through Hong Kong, high degree of trade related to foreign investment, and large amount of `illegal' trade. Re-exports occur when imports to Hong Kong are consigned to a buyer in Hong Kong, who adds a markup, and exports the goods elsewhere without fundamentally changing the goods. Using U.S. data and accounting for re-exports, the U.S.-China trade balance has to be lowered by 35 percent. Foreign investments in China accounted for 45 percent of China's exports. Foreign investments include foreign direct investment (FDI) and foreign subcontracting. `Illegal' trade between China and Taiwan has been induced by Taiwan's `no direct trade' policy. Illegal trade such as smuggling and tariff evasion also affect China's trade with her other trading partners.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5595.
Length: Date of creation: May 1996 Date of revision: Publication status: published as K.C. Fung. "Accounting for Chinese Trade: Some National and Regional Considerations". Geography and Ownership as Bases for Economic Accounting. Edited by Robert E. Baldwin, Robert E. Lipsey, and J.David Richardson, Chicago, Ill: The Univ. of Chicago Press, 1998, pp. 173-200. Handle: RePEc:nbr:nberwo:5595
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