China-US Trade Balance under the Ownership-based Statistical System*

Lin Ling 1, Ge Ming1 and Zhao Suping
1 School of Economics and Management, Wuhan University, Wuhan, China
2 School of International Business, Sichuan International Studies University, Chongqing, China

Abstract: In the context of economic globalization, territory-based bilateral tradestatistics are no longer compatible with the reality of cross-border flow of capital factorand rapid emergence of multinational firms. On the basis of survey of literature studies, thispaper has created a three-country model of bilateral trade based on ownership principleand demonstrated that ownership-based statistical system under this model can reflectbilateral trade volume and balance more objectively, truthfully and comprehensively. Inaddition to theoretical demonstration, this paper has revaluated China-US trade balanceusing ownership-based statistical methodology and the result indicates that the existingstatistical system of trade severely overestimates the real level of China-US trade balanceand FDI in China is a major reason behind increasing China-US trade surplus.
Keywords: ownership-based principle, territory-based principle, trade balance

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