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The Nature of Chinese Exports of Advanced
Technology Products (ATP) to the United States
Michael Ferrantino, Robert Koopman, Zhi Wang, and Falan Yinug
U.S. International Trade Commission
Research Team of Tsinghua University and NDRC of China
*The views expressed in this presentation are solely those of the presenter. They are not meant to represent
in anyway the views of the U.S. International Trade Commission or any of its individual Commissioners.
• People think what China should export
What China is increasingly exporting
“Everyone knew that we would lose jobs in labor
intensive industries like textiles and apparel, but
we thought we could hold our own in the capital-
intensive, high-tech arena. The numbers we’re
seeing now put the lie to that hope – as China
expands its share even in core industries such as
autos and aerospace.”
Robert Scott, U.S. Economic Policy
Institute, report presented to the U.S.-
China Economic and Security Review
Commission, January 12, 2005
Outline
• Definition and Classification of Advanced
Technology Products (ATP) in U.S. and China
• Method of Reconciliation
• Results
• Conclusions and Future Work
Major Results
• Balance in ATP trade:
– China ran a $41-$49 billion surplus with U.S. in 2006 based
on U.S. Census ATP definition, but not in every sector
• Role of processing trade:
– More than 95% of China’s ATP exports were processing
exports during 1995-2006
• Role of different types of firms:
– More than 90% of China’s ATP exports to U.S. were
produced by Foreign Invested Enterprises (FIE) in China
• Role of government policy zones:
– About 65% of China’s ATP exports to U.S. were from
government policy zones in 2006
• Relative price and within-product specialization:
– A huge quality gap still exist between Chinese ATP exports to
U.S. and U.S. ATP exports to China
Current Definition of High-tech
Trade in the United States
The U.S. Census Advanced Technology Products
(ATP) list: Product based
• Starts from the development of broad technology
fields commonly considered as advanced
technology
• Only products significantly associated with one or
more of these leading edge technologies can be
deemed as ATP
• Roughly 700 of the 20,000 HTS-10 codes in use
have been identified as ATP by Census
Classification of ATP in the United States
Technology Field Example of Products
Biotechnology Vaccines for human medicine, vaccines for veterinary
medicine
Life Sciences Magnetic resonance imaging apparatus,
electrocardiographs, artificial joints
Opto-Electronics Rangefinders, stereoscopic microscopes, lasers other
than laser diodes
Information & Communications Personal computers, facsimile machines,
communications satellites, camcorders
Electronics Particle accelerators, semiconductors, smart cards
Flexible Manufacturing Industrial robots, thermostats, semiconductor
manufacturing equipment
Advanced Materials Optical fiber cables
Aerospace Turbojet aircraft engines, new multi-engine airplanes
Weapons Guided missiles, self-propelled artillery weapons
Nuclear Technology Nuclear reactors, uranium compounds enriched in
U235
Current Definition of High-tech
Trade in China
Name Version Characteristics Intended
Purpose
China’s High and 2000 8 fields and 1900 Policy orientation
New Technology 2003 products -Basis for export
Export Products 9 fields and 1835 value added tax
Catalogue products (VAT) rebate
2006 9 fields and 1601 benefits
products
China’s High and 1999 9 fields and 229 Statistical
New Technology HS-6 codes orientation - used
Product Import and in Customs’
Export Statistics “Monthly
Catalogue Statistical Report”
since 2002
Method of Reconciliation
• Calculate the ATP value share in both U.S. imports
from and exports to China at HS-6 level based on U.S.
trade statistics
• Apply these same shares to China Customs data at HS-
6 level
• Major advantages:
– Blend the information available in the Chinese data on firm
ownership (SOE, FIE etc.), customs regime (normal,
processing, etc), and policy incentive zones (SEZs, high-tech
zones, etc) with the information in the U.S. data on the finely
disaggregated definition of ATP
– Obtain more detailed structural information on U.S.-China
ATP trade.
Why U.S. ATP Classification Was Used
in Our Reconciliation Exercise
• Chinese HNTP Exports and Imports Statistical
Catalogue is a near-duplication of the 2000 version of
the U.S. Census ATP list at HS-6 level.
• Chinese HNTP Export Catalogue, used for VAT rebates
includes many “new” products that are clearly not high-
tech (such as starches, some processed food, furniture,
etc.).
• China's classification resulted in a much higher ATP
share in China’s total trade than that based on U.S
classification (Table 9 in the joint paper).
U.S. Census 2000 version ATP list and China’s
HNTP Import and Export Statistics Catalogue
Technology Field U.S.-China U.S. China
Common Code only code only code
Biotechnology 7 0 0
Life Science 62 6 0
Opto-Electronics 15 1 0
Information &
Communications 37 1 0
Electronics 22 0 0
Flexible
Manufacturing 54 1 0
Advanced Materials 4 0 0
Aerospace 17 2 0
Weapons 5 7 0
Nuclear Technology 6 1 0
Total 229 19 0
Three Types of Broad Incentives Affect
China’s Export Behavior
• Who you are (Domestic Firms or FIEs)
• What you do (“imports for exports” --processing
exports or ordinary exports)
• Where you are located (exports produced in
various government policy zones or outside
these zones)
Thus, the pattern of exports deviates somewhat
from pure comparative advantage
The U.S. Deficit in ATP Trade with China
Was between $41-49 Billion in 2006
40,000
30,000
20,000
Millions US Dollars
10,000
0
-10,000
-20,000
-30,000
-40,000
-50,000
-60,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
US reported ATP trade balance with the World
Data Source:
U.S. Census, U.S. ATP trade balance with China and Hong Kong reported by U.S.
China and Hong
Kong Customs U.S. ATP trade balance with China reported by China & Hong Hong
U.S. ATP trade Deficient with China was Concentrated in
Information and Communication Technology, but still Enjoys
Bilateral Surpluses in Electronics and Aerospace Technology
10
5
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-5
Billions U.S.
Dollars
-10
-15
-20
-25
-30
-35
-40
Office, accounting and computing machinery, ISIC 3000
Electronic valves and tubes and other electronic components, ISIC 3210
Television and radio transmitters and apparatus for line telephony, ISIC 3220
Data Source: Television and radio receivers, sound or video recording or reproducing apparatus, ISIC 3230
U.S. Census
Manufacture of aircraft and spacecraft, ISIC 3530
China’s ATP Trade Surplus with the U.S.
was Due Solely to Processing Exports
50,000
40,000
Millions of U.S. Dollars
30,000
20,000
10,000
0
-10,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Data Source: China Custom Statistics, U.S. Census ATP definition
Processing Normal Others
China’s ATP Trade Surplus with U.S. was mainly
Generated by Foreign-Invested Enterprises Since
China’s WTO Accession
35,000
30,000
Millions of U.S. Dollars
25,000
20,000
15,000
10,000
5,000
0
-5,000
-10,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Data Source: China Custom Statistics, U.S. Census ATP definition
SOE Joint Veture Wholly Foreign Collective Private
Since China’s WTO Accession, Private Firms have
generated the Largest Part of the Trade Surplus
for All Commodities
120,000
100,000
Millions of U.S. Dollars
80,000
60,000
40,000
20,000
0
-20,000
-40,000
-60,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Data Source: China Custom Statistics, U.S. Census ATP definition
SOE Joint Veture Wholly Foreign Collective Private
Various Special Economic Zones Contributed
Significantly to China’s ATP Trade Surplus with
the United States
13,000
11,000
Millions of U.S. Dollars
9,000
7,000
5,000
3,000
1,000
-1,000
-3,000
-5,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Data Source: China Custom Statistics, U.S.Census ATP definition
Special Economic Zone Economic & Technological Development Area
Export Processing Zone Hi-Technology Industry Development Area
Others
More than 95% of Chinese ATP Exports
to U.S. were Processing Exports
100
Percent of Total ATP Exports
90
80
70
60
50
40
30
20
10
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Processing exports Normal exports
Data Source: China Custom Statistics, U.S. Census ATP definition
Since 2003, about 90% of Chinese ATP
Exports to U.S. were Produced by FIEs
80
70
Percent of Total ATP
60
50
Exports
40
30
20
10
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
SOE Joint Veture Wholy Foreign Collective Privite
Data Source: China Custom Statistics, U.S. Census ATP definition
About 65% of China’s ATP Exports to
U.S. Came from Various Government
Policy Zones in 2006
30
Percent of Total ATP Exports
25
20
15
10
5
0
1996 1998 2000 2002 2004 2006
Special Economic Zone Economic & Technological Development Area
Hi-Technology Industry Development Area Export Processing Zone
Data Source: China Custom Statistics, U.S. Census ATP definition
Only about 25% of China’s Merchandise
Exports to the World were from these
Government Policy Zones
30
25
Percent of Total Exports
20
15
10
5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
All Economic Zone Exclude Special Economic Zone
Data Source: China Custom Statistics
China's Processing ATP Exports as Percent
of Total ATP Exports to U.S. by Technology Fields
1996, 2006
Nuclear Technology
Information & Communications
Opto-Electronics
Electronics
2006
Flexible Manufacturing 1996
Advanced Materials
Aerospace
Life Science
Weapons
0 10 20 30 40 50 60 70 80 90 100
Data Source: China Custom Statistics, U.S. Census ATP definition
Share of Wholly Foreign Owned Firms in China’s
Total ATP Exports to the U.S. by Technology
Fields, 1996, 2006
Total
Nuclear Technology
Biotechnology
Aerospace
Advanced Materials
2006
Weapons 1996
Life Science
Flexible Manufacturing
Information & Communications
Electronics
Opto-Electronics
0 10 20 30 40 50 60 70 80 90 100
Data Source: China Custom Statistics, U.S. Census ATP definition
Relative Price of U.S.-China ATP Trade
• Recent literature of international trade emphasizes
the importance of specialization across varieties
within a product (Schott, 2004)
• Fontagne, Gaulier and Zignago (2007) show that
China’s export structure is more similar to Japan,
U.S., and EU than to Brazil and Russia
• However, judged on unit values, Chinese exports
are more likely to be in the low end of the market
than those of the high-income countries
Unit Value: Example 1
Exports to the World
• Color video monitor (HS 852821), 2005
– Unit value of G-3 exports = $467.4
– Unit values in China’s exports
• Wholly foreign owned firms = $241.5
– Export Processing Zones = $347.8
– Processing/High-tech zones = $456.7
– Processing/outside any zones = $ 56.8
– Normal trade/high-tech zones = $364.8
– Normal trade/outside any zones = $ 73.6
• State-owned firms = $ 207.0
• Joint ventures = $ 126.3
• Private firms = $ 77.2
Unit Value: Example 2
U.S. exports to China and China exports to U.S.
HS 9011, 2006
HTS number HTS Product Total exports Unit value
U.S. Dollars U.S. Dollars
U.S. exports to China
9011100000 Stereoscopic microscopes 487,179 3,431
9011200000 Microscopes, for 693,491 11,754
microphotography & cinema
China exports to U.S.
9011104000 Stereoscopic microscopes with 1,592,944 251
means to photo image
9011108000 Stereoscopic microscopes 3,647,098 115
9011204000 Microscopes with means to 1,459,958 215
photograph the image
9011208000 Microscopes, exc with means to 1,864,786 61
photograph the image
Conclusions 1
Trade statistics from different sources consistently
show that the U.S. trade deficit in ATP with China
has grown rapidly in recent years based on the
current U.S. Census ATP classification
Chinese surplus of ATP trade with U.S. is
concentrated in information and communication
technology, while U.S. still enjoys sizeable bilateral
surpluses in electronics and aerospace technology
More than 95 percent of the rapidly expanding ATP
exports from China to U.S. is processing trade,
which is closely related to FDI and largely carried
out by foreign firms
Conclusions 2
Various special economic zones and areas have
largely hosted the rapid expansion of Chinese
ATP exports to the U.S.
The emergence of China as a major supplier to
the U.S. ATP market is closely associated with
a combination of three major factors:
– Fragmentation of global production
– China’s comparative advantage in manufacture
– Chinese Government preference policies to
processing trade and foreign invested enterprises
Conclusions 3
An analysis of unit value adds important insights.
Chinese ATP imports from U.S. were dominated by
large-scale, sophisticated, high-valued equipment
and devices, while Chinese ATP exports to the
United States were still mainly small-scale products
or components in the low-end of the ATP value-
added chain.
Even though China has begun to export a set of
ATP products similar to those exported by the U.S.
in recent years, there appears to remain a
considerable quality and technological gap between
Chinese ATP exports and U.S. ATP exports.
• Future work:
– Refine the definition of ATP
and improve ATP
classification
– Conduct more detailed studies
on how various policy
incentive impact China’s ATP
trade
– Conduct more careful analysis
of China’s role and position in
world ATP supply chain
Thank You
My contact information
– Dr. Zhi Wang
– Office of Economics, Research Division
– U.S. International Trade Commission
– Phone: 202-205-3245
– E-mail Address:Zhi.Wang@USITC.GOV
Unit Value Ratio between U.S. Exports to
China and China Exports to the U.S.
Two way traded Advance Technology Product, 1996-2006
Share of SOEs in China’s Total ATP Exports
to U.S. by Technology Fields
1996, 2006
Total
Opto-Electronics
Information & Communications
Electronics
Weapons
2006
Flexible Manufacturing 1996
Advanced Materials
Life Science
Biotechnology
Aerospace
Nuclear Technology
0 10 20 30 40 50 60 70 80 90 100
Data Source: China Custom Statistics, U.S. Census Definition
Share of Private Firms in China’s Total ATP
Exports to U.S. by Technology Fields
2001, 2006
Total
Nuclear Technology
Aerospace
Electronics
Opto-Electronics
2006
Information & Communications 2001
Flexible Manufacturing
Advanced Materials
Life Science
Weapons
Biotechnology
0 10 20 30 40 50 60 70 80 90 100
Data Source: China Custom Statistics, U.S. Census definition
