China’s Trade in Value Added and the Value Added in Trade: Evidence from World Input-Output Database(WIOD)

In this paper, we introduced two measures of value added flows between countries with a focus on the Chinese economy: First, “Trade in Value Added,” accounts for the value add of one country directly and indirectly embodied in the final consumption of another country. Second, “Value Added in Trade,” measures the value added in gross trade flows. Using the recently compiled World Input-Output Database (WIOD), a selection of results in China’s trade with various regions compared Asia, the EU-27, Latin America, North America, and Rest of World, based on the presented concepts. We find that for both exports and imports, trade statistics in gross terms have always been larger than the trade in value added in China. We also find that China’s bilateral trade balances with various regions in gross terms have been either overestimated or underestimated. For example, China’s gross net export in 2009 is overestimated for the EU by 24.5% and by 21.8% for North America, (Canada and the USA) respectively.