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The U.S.-China Bilateral Trade Balance: It'S Size And Determinants

  • Wing Thye Woo
  • Robert Feenstra
  • Wen Hai
  • Shunli Yao

    (Department of Economics, University of California Davis)

This paper has two aims. The first is to reduce the range within which the true U.S.-China bilateral trade deficit lies. The second is to identify the determinants of the bilateral trade deficit, and offer an assessment of their relative importance. We calculate a smaller range of values for the bilateral trade deficit than in previous studies, due to a new estimation method that takes advantage of our access to detailed Chinese Customs data at the commodity level. For example, the revised U.S.-China bilateral trade deficit is $15 billion to $20 billion in 1994, and $16 billion to $22 billion in 1995, compared to the official range of $8 billion to $30 billion, and $9 billion to $34 billion, respectively. The widening of the U.S.-China bilateral trade deficit in recent years reflected many factors. In our opinion, the two chief factors are (i) macroeconomic forces in the U.S. and China moving in opposite directions, causing their respective overall trade balance to move in opposite directions; and (ii) the accelerated relocation of production of U.S. imports from East Asia to China.

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Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 989.

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Length: 49
Date of creation: 09 Jan 2003
Date of revision:
Handle: RePEc:cda:wpaper:98-9
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  1. Liu, L.Y. & Woo, W.T., 1992. "Saving Behaviour Under Imperfect Financial Markets and the Current Account Consequences," Papers 413, California Davis - Institute of Governmental Affairs.
  2. K.C. Fung, 1996. "Accounting for Chinese Trade: Some National and Regional Considerations," NBER Working Papers 5595, National Bureau of Economic Research, Inc.
  3. repec:sae:niesru:v:149:y::i:1:p:30-52 is not listed on IDEAS
  4. Sheffrin, Steven M. & Woo, Wing Thye, 1990. "Present value tests of an intertemporal model of the current account," Journal of International Economics, Elsevier, vol. 29(3-4), pages 237-253, November.
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