Accounting for discrepancies in bilateral trade: The case of China, Hong Kong, and the United States

Chinaʹs reported exports to the United States have long been smaller than U.S.-reported imports from China. Earlier explanations for this focused on re-exports through Hong Kong, and appeared to account for most of the difference. Now, even after taking Hong Kong into account properly, there has emerged a new and growing discrepancy which amounted in 2005 to $46 billion, perhaps 20% of the “true” value. Comparisons of detailed customs records from China, Hong, Kong, and the United States show that direct exports from Chinese ports and Chinese exports through third countries account for much of the discrepancy, relative to trade flows involving Hong Kong. Transshipment and re-exports through Hong Kong seem no longer to be the major explanation of the discrepancies, especially in recent years. Adjustment for a likely double-counting between re-exports and transshipments make the estimated discrepancy for 2005 increase to $59 billion.