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

  • Robert C. Feenstra
  • Wen Hai
  • Wing T. Woo
  • Shunli Yao

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 California Davis - Department of Economics in its series Department of Economics with number 98-09.

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Handle: RePEc:fth:caldec:98-09
Contact details of provider: Postal: University of California Davis - Department of Economics. One Shields Ave., California 95616-8578
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  1. repec:sae:niesru:v:149:y::i:1:p:30-52 is not listed on IDEAS
  2. Liu, Liang-Yn & Woo, Wing Thye, 1994. "Saving Behaviour under Imperfect Financial Markets and the Current Account Consequences," Economic Journal, Royal Economic Society, vol. 104(424), pages 512-27, May.
  3. Sheffrin, S.M. & Woo, W.T., 1989. "Present Value Tests Of An Intertemporal Model Of The Current Account," Papers 61, California Davis - Institute of Governmental Affairs.
  4. K.C. Fung, 1996. "Accounting for Chinese Trade: Some National and Regional Considerations," NBER Working Papers 5595, National Bureau of Economic Research, Inc.
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