China's trade surplus with US 'shrinks'

China's trade surplus with the United States shrinks by 25 percent if calculated on a value-added basis, reflecting the high level of foreign-sourced content in Chinese exports, according to a new report published on Wednesday by the Organization for Economic Cooperation and Development and the World Trade Organization.

China's gross exports incorporate a large share of value from foreign sources and nearly half of all imported intermediates are used as inputs for exports, the report said. For example, nearly 40 percent of the total value of China's electronics exports comes from foreign sources.

The findings by the OECD and the WTO came amid a continuing debate on whether China should substantially appreciate the value of the yuan to address the trade imbalances it has with key trading partners such as the US and the European Union.

The OECD and the WTO hope that the launch of the new findings will reveal a different picture of global trade from the one using conventional data and show that raising trade barriers by governments will only hurt their countries' own competitiveness.

"Our new work with the WTO allows us to see more clearly than ever before how blocking imports will damage a country's own competitiveness," OECD Secretary-General Angel Gurria said.

He jointly launched the new trade data in Paris with WTO Director-General Pascal Lamy, EU Trade Commissioner Karel de Gucht and New Zealand Trade Minister Tim Groser.

"Trade negotiations have to catch up to these new realities, and countries need to implement policies that help their firms better manage their place in international value chains," Gurria added.

Jing Linbo, vice-president of the Chinese Academy of Social Sciences' national academy of economic strategy, said that the joint research by the OECD and the WTO will have positive implications for China's effort to manage its delicate trade relations with key partners.

"It will also help ease the pressure from its trade partners on the issue of the yuan's value," Jing said.

The report also gave services a much bigger role in trade than conventional figures.

While China has more comparative advantages in manufacturing industries, a significant share of the value-added goods it exports originates in the service sector. In industries such as electronics, for example, 30 percent of the value exported comes from the service sector, the report said.

The trade surpluses of major commodity exporters such as Australia, Brazil and Canada with their key trading partners shrink on a value-added basis, as their raw materials are further processed by trading partners and then re-exported.