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The US-China Bilateral Trade Balance: Its 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 US-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 US-CHINA bilateral trade deficit in recent years reflected many factors. In our opinion, the two chief factors are (i) macroeconomic forces in the US and China moving in opposite direction, causing their respective overall trade balance to move in opposite directions; and (ii) the accelerated relocation of production of US imports from East Asia to China.

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File URL: http://www.nber.org/papers/w6598.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6598.

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Date of creation: Jun 1998
Date of revision:
Handle: RePEc:nbr:nberwo:6598
Note: ITI PR
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  1. 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.
  2. K. C. Fung, 1998. "Accounting for Chinese Trade: Some National and Regional Considerations," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 173-204 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, 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.
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