Social Sciences in China (Chinese Edition)

No.1, 2013

Reassessing China’s Foreign Trade Degree of Dependence and Imbalance: Value Added Trade in the Global Link of Production

(Abstract)

Li Xin and Xu Dianqing

GDP and foreign trade data distortions have magnified China’s foreign trade degree of dependence and imbalance. GDP distortions mainly arise from the discrepancy between the assessment of real effective exchange rate (REER) and that of purchasing power parity (PPP). Trade data distortions include the redundant calculation of customs border statistics and the inconsistency between the international flow of commodities and the international flow of funds induced by the property issue. A reassessment of China’s real foreign trade degree of dependence and imbalance in 2007 reveals that China’s foreign trade degree of dependence in 2007 fell from the official statistics of 68.02% to 31.59%, and that the foreign trade imbalance also dropped from the official statistics of 10.13% to 2.11%. The accusation of “China manipulating the exchange rates” is absurd and groundless.