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Trade in factor income and the US-China trade balance

Author

Listed:
  • Bo, Meng
  • Yuning, Gao
  • Jiabai, Ye
  • Meichen, Zhang
  • Yuqing, Xing

Abstract

Numerous the US multinational enterprises sold considerable amounts of products, which were “made” in China or third countries, to China’s domestic consumers, but these sales were not counted as the US exports to China. We propose a beyond-border-type measure, “trade in factor income,” that defines the US-owned factor-income induced by China’s final demand as the US export to China. Based on this measure, we find that the conventional cross-border trade statistics averagely leads to 17.4-32.0% overestimation of the US-China trade deficit (2005-2016). Our new measure helps a great transformation of trade measures from the territory-based “made in” label to income-based “created by” label.

Suggested Citation

  • Bo, Meng & Yuning, Gao & Jiabai, Ye & Meichen, Zhang & Yuqing, Xing, 2021. "Trade in factor income and the US-China trade balance," IDE Discussion Papers 819, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper819
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    File URL: https://ir.ide.go.jp/record/52200/files/IDP000819_001.pdf
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    Cited by:

    1. Yang, Lin & Li, Yiming & Sun, Jingjing & Zhang, Yinuo & Shao, Jiahuan & Xing, Helong, 2024. "Revisiting the carbon-economic inequality within global value chain considering corporate heterogeneity: Evidence from China's trade," Technological Forecasting and Social Change, Elsevier, vol. 205(C).
    2. Yan, Yunfeng & Li, Xiyuan & Wang, Ran & Meng, Bo & Zhao, Zhongxiu & Li, Xuemeng, 2024. "Visible carbon emissions vs. invisible value-added: Re-evaluating the emissions responsibility of multinational enterprises in global value chains," Ecological Economics, Elsevier, vol. 224(C).
    3. Wang, Lei & Ramsey, Thomas Stephen, 2024. "Digital divide and environmental pressure: A countermeasure on the embodied carbon emissions in FDI," Technological Forecasting and Social Change, Elsevier, vol. 204(C).
    4. Hassall, Alison & McKenna, Sarah & Pasalich, Dave S., 2024. "How does kinship and foster care differ on caregiver-child relationship quality and child and caregiver mental health?," Children and Youth Services Review, Elsevier, vol. 156(C).
    5. Yue, Youfu & Hou, Junjun & Zhang, Meichen & Ye, Jiabai, 2024. "Does the sticky relationships of global value chains help stabilize employment? Evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 632-651.

    More about this item

    Keywords

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    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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