By Hongman JIN Statistics Department Customs General Administration People’s republic of China
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Transcript of By Hongman JIN Statistics Department Customs General Administration People’s republic of China
Reasons for Discrepancies in China’s External Trade Statistics with
partners:the Particular Role of Processing
Trade
By Hongman JINStatistics DepartmentCustoms General AdministrationPeople’s republic of China
September 12, 2005
11
0
100
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Bill
ion
US
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-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Gro
wth
rate
Export I mportExport growth rate I mport growth rate
China's Trade Development, 1994-2004
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3
Major issues:
• Methodology and quality of Chinese trade statistics has attracted much attention
• Doubts on the validity of the data have been cast, because of the large discrepancies in trade statistics between China and major partners, in particular the US and EU
• Debates in trade negotiations
Discrepancies in China-US TradeTable1. Westbound Trade (China Export - US Import, in billion US$)
1993 1995 1997 1999 2001 2003China Export 17 24.7 32.7 42 54.3 92.5US Import 31.5 45.5 62.6 81.8 102.3 152.4Discrepancy(Imp - Exp)
14.5 20.8 29.9 39.8 48 59.9
Discrepancy %(Imp- Exp)/Imp 46% 46% 48% 49% 47% 39%
Table 2. Eastbound Trade (US Export - China Import , in billion US$)
1993 1995 1997 1999 2001 2003US Export 8.8 11.8 12.9 13.1 19.2 28.4China Import 10.7 16.1 16.3 19.5 26.2 33.9Discrepancy(Imp - Exp)
1.9 4.3 3.4 6.4 7 5.5
Discrepancy %(Imp- Exp)/Imp 18% 27% 21% 33% 27% 16%
Source: China Customs, US Bureau of Census
Source: China Customs, US Bureau of Census
Discrepancies in China-EU Trade Table 3. Westbound Trade (China Export - EU Import, in billion US$)
1993 1995 1997 1999 2001 2003China Export 11. 7 19. 1 23. 8 30. 2 40. 9 72. 2EU Import 23. 0 34. 4 42. 5 52. 9 68. 0 108.4Discrepancy(Imp - Exp)
11. 3 15. 3 18. 7 22. 7 27. 1 36. 2
Discrepancy %(Imp- Exp)/Imp 49% 44% 44% 43% 40% 33%
Table 4. Eastbound Trade (EU Export - China Import , in billion US$)
1993 1995 1997 1999 2001 2003EU Export 13. 3 19. 1 18. 7 20. 6 26. 9 45. 7China Import 14. 4 21. 3 19. 2 25. 5 35. 7 53. 1Discrepancy(Imp - Exp) 1. 1 2. 2 0. 5 4. 9 8. 8 7. 4Discrepancy %(Imp- Exp)/Imp 8% 10% 3% 19% 25% 14%
Source: China Customs, EUROSTAT
Source: China Customs, EUROSTAT
Summary of the results of the reconciliation studies
Reasons for discrepancies
• Impact of differences in methodology is small• CIF/FOB, Less than 10% of import value• Hong Kong re-export is the main reason for discrepanc
ies, Underestimation of goods to the US or EU via HK, Overestimation of China export to HK. HK’s re-export value has been used for the adjustment
5.7
5.9
21.2
3.210.84.3
Direct Trade
Via HK(HK)
0.51.1
Via Other
Via
HK(C
N)
China-US Direct and Indirect
Trade Flows 1993
HK Re-export Margin
• Large re-export margin added by HK makes the discrepancies more significant
• Estimation: unit value approach
1.
.
RX RX
I RX
UV Q
UV Q
• China-US eastbound trade : 40% ,1993
China-EU westbound trade: 35% ,1995
Why does Hong Kong deal with large re-exports of Chinese goods?
Survey by Hong Kong
Table 5. Estimated Proportion of Outward Processing TradeTrade Type 1993 1995 1997 1999 2001 2003Total export to mainland China 47. 9% 49. 0% 48. 1% 47. 5% 47. 5% 43. 9%Total Import from mainland China 73. 8% 74. 4% 81. 2% 80. 5% 78. 0% 71. 7%Reexport of mainland the China to other places 80. 8% 82. 2% 88. 4% 86. 6% 82. 2% 79. 4%soure: Hong Kong Census and Statistical Department
China Processing Trade
Inward Processing Trade(Processing Trade)
• Type I:
The imported inputs remain the property of the foreign supplier.
• Type II:
The ownership of imported inputs are transferred to Chinese producers, more commonly FIEs
• Benefits from duty exemptions• Value record: According to UN recommendation
China's Processing Trade Development, 1994-2004
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Bil
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S$
-5%0%5%10%15%20%25%30%35%40%
Gro
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Processi ng Export Processi ng I mport
Export growth I mport growth
Fast growth in recent years
High Proportion of Total Trade
Proportion of Total ExportCustoms Regimes 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Processi ng Trade 47% 50% 56% 55% 57% 57% 55% 55% 55% 55% 55%Ordinary Trade 51% 48% 42% 43% 40% 41% 42% 42% 42% 42% 41%Other 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% 4%
Proportion of Total ImportCustoms Regimes 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Processi ng Trade 41% 44% 45% 49% 49% 44% 41% 39% 41% 39% 40%Ordinary Trade 31% 33% 28% 27% 31% 40% 44% 47% 44% 45% 44%Other 28% 23% 27% 23% 20% 15% 14% 15% 15% 15% 16%
FI Es i nvol ved i n the Processi ng Trade
0%
20%
40%
60%
80%
100%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Prop
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ExportI mport
Foreign Invested Enterprises play an important role
Distributed in coastal areas
• Guangdong processes nearly half of the total products.
• Transfer trend in recent years
Guangdong
Jiangsu
Concentrated in consumer products
Processing Products of 1994 and 2004HS2
M US$ Share M US$ ShareTL 56976 100% 327970 100%85 11558 20% 104702 32%84 3594 6% 95210 29%90 1171 2% 12695 4%62 6593 12% 11059 3%95 3849 7% 10329 3%39 1920 3% 7434 2%64 4766 8% 7017 2%94 1319 2% 6922 2%61 2854 5% 5579 2%86 612 1% 5333 2%42 2663 5% 3879 1%sub-TL 72% 82%
1994 2004
Differences in country of origin of material and the final
destination marketImport
Taiwan P. 20%, Japan 18%, Korea 14%,
US 5%, EU %, HK 2%, Singapore 3%
Export
USA, 26%, EU 17%, HK 22%, Japan 13%
Korea 4%, Taiwan P. 2%, Singapore 3%
Hong Kong’s Role
• Biggest supplier of Chinese FDI
• Investment mainly in Guangdong Province.
• Exports usually transported via Hong Kong
A decreasing trend in reliance on Hong Kong in recent years
processing export via Hong Kong
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via
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Total Processi ng exportProcessi ng vi a Hong Kongvi a Hong Kong rate
A decreasing trend in trade statistics discrepancies
Di screpanci es i n %
0%
10%
20%
30%
40%
50%
60%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Chi na Export - US I mport
Chi na Export - EU I mport
Debate in China
• Positive:
helps employment, updates manufacture capacity, contributes to GDP growth
• Negative:
labour intensive products, low added value, low salaries, creates environment pollution,
leads to trade conflicts
• Hong Kong’s re-export of Chinese goods, in particular Chinese processing goods, is the major reason for discrepancies in China’s reported trade statistics with its major partners.
• An economic reality: the real expansion of Chinese foreign trade is due to the massive outsourcing schemes of foreign invested enterprises into the low-margin processing sector in China.
• Despite the decreasing trend in reliance on Hong Kong, the increasing scale of the processing trade means large discrepancies will still exist in the future.
Conclusion