Re-estimation of China-EU trade balance

Significant discrepancy exists between official Chinese and EU trade statistics on the magnitudes of the China-EU trade in goods as well as in services. While the discrepancy of China-U.S. trade surplus has been thoroughly studied by scholars and policymakers, the discrepancy of China-EU trade surplus is barely discussed in literatures. This may lead to seriously bias in understanding China-EU trade relationship, and even cause unnecessary trade friction. In this paper, we discuss the reasons behind the discrepancy of China-EU trade and quantify the extent to which the discrepancy is contributed by transportation costs, re-exports and their markups. We also employ the input-output tables of both EU and China, and measure the China-EU trade balance of goods and services in both domestic value-added (DVA) terms as well as in gross terms. The discrepancy of China-EU trade balance in goods (and services) still exists after adjustments, but is significantly reduced. With the adjustments on price and re-exports, in 2016, the discrepancy of China-EU trade in goods and services of Chinese release over EU release would shrink from an initial estimation of US$90.6 billion to an estimation of US$20.4 billion in gross terms, and further to US$15.8 billion in value-added terms.