a

GAO

United States Government Accountability Office

Report to Congressional Committees

December 2005 CHINA TRADE

U.S. Exports, 

Investment, Affiliate 

Sales Rising, but 

Export Share Falling

GAO-06-162
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2005

CHINA TRADE

U.S. Exports, Investment, Affiliate Sales 

Highlights of GAO-06-162, a report to Rising, but Export Share Falling 

congressional committees 

China is important to the global 

economy and a major U.S. trading 

partner. By joining the World 

Trade Organization (WTO) in 2001, 

China pledged to further liberalize

its trade regime and follow global

trade rules. While U.S.-Chinese 

commercial relations have

expanded, controversies have

emerged, including the size and 

growth of the U.S. trade deficit

with China, China’s lack of 

intellectual property protection,

and China’s implementation of its 

WTO obligations. Despite these 

challenges, China’s vast consumer 

and labor markets present huge 

opportunities for U.S. exporters

and investors. GAO (1) analyzed

U.S. goods and services exports to

China, (2) assessed how U.S. 

exports to China have fared against 

those of other major trading 

partners, and (3) analyzed U.S.

investment and affiliate sales in 

China. 

We provided the Office of the U.S. 

Trade Representative, the 

Departments of Agriculture and 

Commerce, and the International 

Trade Commission with a draft of 

this report for their review and

comment. These agencies chose to

provide technical comments from

their staff. We incorporated their 

suggestions as appropriate. 

China is a rapidly growing market for U.S. goods and services. Although still 

small, accounting for only 4 percent of U.S. goods exports in 2004, U.S. 

goods exports to China tripled, from $11 billion to $33 billion, and increased 

across virtually all major categories from 1995 to 2004. Over the same

period, China went from the ninth-largest to the fifth-largest U.S. market for 

goods behind Canada, the European Union, Mexico, and Japan. Although 

smaller, U.S. services exports grew from $3 billion to $7 billion, from 1995 to 

2004. Economic growth in China and liberalization of its market, 

including joining the WTO, are among the factors driving the impressive 

export growth.

Despite rapid growth, U.S. goods exports to China have not kept pace with 

those of other countries, particularly exports from Asia. The U.S. share of 

world goods exports to China declined from 12 percent to 9 percent, from 

1995 to 2004, while South Korea and Taiwan’s shares increased and at times 

surpassed that of the United States. The decline is partly due to increased 

integrated production among China’s neighbors; growing resource-based 

exports, such as oil, from smaller countries; and macroeconomic factors, 

including exchange rates. 

Sales to China by U.S. affiliates located in China grew faster and exceeded 

U.S. exports to China in 2003, $38 billion versus $35 billion, while U.S. 

foreign direct investment grew from $2 billion to $15 billion from 1995 to 

2004. Growth in U.S. investment and affiliate sales, particularly for 

goods, is due at least in part to China’s attraction as a growing economy,

including its burgeoning domestic market, high productivity and low 

labor costs, and developing infrastructure. 

U.S. and World Goods Exports to China Are Rising, but U.S. Share of World Goods Exports 

to China Is Falling (1995-2004) 

Source: GAO analysis of official Chinese trade statistics.

0

100

200

300

400

500

600

U.S. exports to China

(dollars in billions)

World exports to China

(dollars in billions)

Year

Dollars in billions Percentage

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

U.S. share of world exports

to China (percentage)

0

3

6

9

12

15

18

www.gao.gov/cgi-bin/getrpt?GAO-06-162.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4128 or yagerl@gao.gov. 
Page i GAO-06-162 China Trade

Contents

Letter 1

Results in Brief 2

Background 5

Goods Exports to China Experienced Rapid Growth in the Past 

Decade, Driven by China’s Economic Growth and Market 

Liberalization 7

While Overall Services Exports to China Grew during the Past 10 

Years, Growth among Services Categories Varied 14

U.S. Goods Exports Have Not Kept Pace with Other Nations’ 

Exports to China 21

U.S. Investment in China Has Increased, and Affiliate Sales 

Surpassed U.S. Exports 32

Observations 40

Agency Comments 41

Appendixes

Appendix I: Objectives, Scope, and Methodologies 43

Appendix II: U.S. Goods Exports and U.S. Share of World Goods Exports 

to China 47

Appendix III: Services Trade Categories and Their Definitions 64

Appendix IV: U.S. Foreign Direct Investment and U.S. Affiliate Sales in 

China 65

U.S. Foreign Direct Investment in China 65

U.S. Affiliate Sales in China 66

Appendix V: GAO Contact and Staff Acknowledgments 69

Tables Table 1: U.S. Exports to China by the Annual Growth Rate 

(1995-2004) and Export Value for 2004 11

Table 2: Five Main U.S. Services Exports to China by Annual 

Growth Rate (1995-2004) and Export Value for 2004 17

Table 3: Subcategory of U.S. Services Exports to China by the 

Annual Growth Rate (1995-2004) and Export Value for 

2004 18

Table 4: Subcategory of U.S. Services Exports to China by the 

Annual Growth Rate (1995-2004) and Export Value for 

2004 19

Table 5: Changes in U.S. Share of World Exports to China, 

1995-2004; and U.S. Goods Exports to China, 2004 25
Contents

Page ii GAO-06-162 China Trade

Table 6: Examples of Oil-Producing Countries with 

Higher-Than-Average Export Growth Rates to China, 

2000-2004 31

Table 7: Concordance between 10 GAO Categories and the U.S. 

Harmonized Tariff Schedule Section Headings 44

Table 8: Goods Subcategories for Which U.S. Goods Exports to 

China Accounted for More Than 10 Percent of Total U.S. 

Goods Exports in 2004 47

Table 9: Goods Subcategories for Which U.S. Goods Exports to 

China Accounted for Less Than 1 percent of Total U.S. 

Goods Exports in 2004 48

Table 10: Goods Subcategories with the Highest Value Increase in 

U.S. Exports to China (Average 1995-1999 Versus Average 

2000-2004) 50

Table 11: Products with the Highest Value Decrease in Exports to 

China (Average 1995-1999 Versus Average 2000-2004) 51

Table 12: Top 20 Declines in U.S. Share of World Exports to China, 

1995-2004 52

Table 13: Top 20 Increases in U.S. Share of World Goods Exports to 

China, 1995-2004 53

Table 14: U.S. Goods Exports and U.S. Share of World Goods 

Exports to China—All Categories and Subcategories, 

1995-2004 56

Table 15: Industry Group U.S. Foreign Direct Investment to China by 

Annual Growth Rate (1995-2004) and Value Foreign Direct 

Investment for 2004 65

Table 16: Manufacturing Industry Group U.S. Foreign Direct 

Investment to China by the Annual Growth Rate 

(1995-2004) and Value Foreign Direct Investment 2004 66

Table 17: Affiliate industry Group Sales in China by Annual Growth 

Rate (1995-2003) and Sales Value in 2003 67

Table 18: Manufacturing Affiliate Industry Group Sales in China by 

Annual Growth Rate (1995-2003) and Sales Value in 

2003 68

Figures Figure 1: U.S. Goods Export Markets in 2004 8

Figure 2: Value and Share of U.S. Goods Exports to China 9

Figure 3: Top Markets for U.S. Services Exports in 2004 15

Figure 4: Value and Share of U.S. Services Exports to China and as 

a Share of Total U.S. Services Exports, 1995-2004 16

Figure 5: U.S. and World Goods Exports to China and U.S. Share of 

World Goods Exports to China, 1995-2004 23
Contents

Page iii GAO-06-162 China Trade

Figure 6: Share of Goods Exports to China for the Top Six 

Suppliers, 1995-2004 24

Figure 7: Major Suppliers’ Share of World Exports to China of 

Prepared Food, Beverages, Spirits, and Tobacco, 

1995-2004 28

Figure 8: U.S. Foreign Direct Investment in China, Value of 

Cumulative Stock, and Share of Total U.S. Investment, 

1995-2004 33

Figure 9: Realized Annual Investment Flows in China, from the 

World, 2003 34

Figure 10: Growth of Total (Goods and Services) U.S. Affiliate Sales 

in China and U.S. Exports to China, 1995-2004 36

Figure 11: Growth of U.S. Affiliate Sales of Goods in China and U.S. 

Goods Exports to China, 1995-2004 37

Figure 12: Growth of U.S. Affiliate Sales of Services in China and 

U.S. Services Exports to China, 1995-2004 38

Abbreviations

ASEAN Association of Southeast Asian Nations

BEA U.S. Bureau of Economic Analysis

EU European Union

HTS U.S. Harmonized Tariff Schedule

USTR U.S. Trade Representative

WTO World Trade Organization

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Page 1 GAO-06-162 China Trade

United States Government Accountability Office

Washington, D.C. 20548

A

December 9, 2005 Letr

The Honorable Charles E. Grassley 

Chairman

The Honorable Max Baucus 

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable William M. Thomas

Chairman

The Honorable Charles B. Rangel

Ranking Minority Member

Committee on Ways and Means

House of Representatives

China has become an important nation within the global economy and a 

major U.S. trading partner. China is also a top destination for foreign direct 

investment, as multinational corporations increasingly access the Chinese 

market through their foreign affiliates. By joining the World Trade 

Organization (WTO) in 2001, China pledged to further liberalize its trade 

regime and become subject to global trade rules. While U.S.-China 

commercial relations have expanded in recent years, disagreements have 

also emerged over a wide variety of issues, including the size and growth of 

the U.S. trade deficit with China, China’s enforcement of intellectual 

property protection,1 and concerns over China’s implementation of its WTO 

obligations. Despite these challenges, China’s vast consumer and labor 

markets present considerable opportunities for U.S. exporters and 

investors. 

In response to your request for a long-term body of work related to U.S.-

China trade, we provide information in this report on the extent to which 

U.S. companies have accessed the Chinese market through exports to and 

investment in China. Specifically, we (1) analyzed U.S. goods exports to 

China and how they have changed over time, (2) analyzed U.S. services 

exports to China and how they have changed over time, (3) assessed how 

U.S. exports to China have fared against other major trading partners’ 

1

Intellectual property is nontangible property that is the creation of the mind. The 

government protects the intellectual property through means such as copyrights and 

patents.
Page 2 GAO-06-162 China Trade

goods exports to China, and (4) analyzed U.S. investment and affiliate sales 

in China. 

In order to analyze how U.S. exports to China have changed over time, we 

collected and analyzed U.S. goods trade data from the Department of 

Agriculture’s U.S. Census Bureau and U.S. services trade data from 

Department of Commerce’s U.S. Bureau of Economic Analysis (BEA). To 

assess how U.S. exports to China have fared compared with that of China’s 

other major trading partners, we reviewed official Chinese trade statistics. 

We analyzed the goods trade data at various levels, including GAO’s 10 

broad categories of goods, which are aggregations of the 99 chapter 

headings of the U.S. Harmonized Tariff Schedule (HTS). To compare U.S. 

companies’ investments and sales in China to U.S. exports to China, we 

collected and analyzed U.S. direct investment abroad and multinational 

company operations data from BEA and from Chinese trade statistics. We 

recognize the limitations of the Chinese trade statistics and the differences 

from U.S. statistics, but we found them to be sufficiently reliable to present 

individual countries’ shares of China’s trade and their investment in China. 

Finally, we reviewed U.S. government and private sector studies on the 

U.S.-China trade and investment relationship and interviewed relevant U.S. 

government and private sector experts on U.S.-China trade. In order to 

compare real changes in trade flows and remove the effects of price 

inflation or deflation, we used deflators and reported statistics in 2004 

constant dollars, except as noted. Appendix I contains a full description of 

our objectives, scope, and methodologies. 

We performed our work from April 2005 to December 2005 in accordance 

with generally accepted government auditing standards.

Results in Brief Although accounting for only 4 percent of total U.S. goods exports, China is 

a fast-growing market, with U.S. goods exports to China growing faster 

than overall U.S. goods exports over the past decade. In addition, China’s 

ranking among other U.S. trading partners has grown in importance, 

jumping from the 9th-largest market for U.S. goods exports in 1995 to the 

5th-largest in 2004, behind Canada, the European Union (EU), Mexico, and 

Japan. U.S. goods exports to China tripled in value from 1995 to 2004 from 

$11 billion to $33 billion,2

 with an annual real growth rate of 13 percent 

2

All U.S. goods exports statistics are in 2004 constant dollars. See appendix I.
Page 3 GAO-06-162 China Trade

versus a 2 percent real annual growth rate for overall goods exports. In the 

past decade, U.S. goods exports to China increased across virtually all 

major categories, and China was a major market for some U.S. exports, 

mainly raw materials. Much of the growth occurred during the second part 

of the last decade. Economic growth in China and liberalization of its 

market, including joining the WTO, are among the factors driving the 

impressive export growth. China’s development in the manufacturing 

sector has created demand for industrial inputs and raw materials, such as 

electronic circuits for consumer electronics and cotton for the textile and 

apparel industry. 

Although smaller compared with goods, China’s market for U.S. services 

has increased in importance, rising both in dollar value, from $3 billion to 

over $7 billion, and as a share of total U.S. services exports, from 1 percent 

to over 2 percent, from 1995 to 2004.3

 China also moved from the 12th- to 

the 7th-largest market for U.S. services exports during the same period. In 

addition, like goods, U.S. services exports to China grew faster than U.S. 

services exports to the rest of the world. Growth varied among the 5 main 

services categories and their subcategories, with Royalties and Licensing 

and Passenger Fares growing the fastest. Also like goods, overall increases 

in U.S. services exports were likely due to the sharp growth of the Chinese 

economy and the resulting increased demand for services. Slower U.S. 

export growth in some categories may be due to relatively slower trade 

liberalization in China for services. For example, many WTO services 

commitments have only recently come into effect or are not yet scheduled 

to be phased in until later and restrictions remain. However, trade in 

services also tends to be smaller than trade in goods, in part, because many 

services require local presence in China and thus are harder to provide 

internationally. 

Although growing rapidly, U.S. goods exports to China have not kept pace 

with other countries’ goods exports to China, particularly from Asia.4

 The 

U.S. share of world goods exports to China declined from 12 percent to 9 

percent over the past decade. At the same time, South Korea and Taiwan 

increased their relative shares, and in some cases, surpassed the United 

States as suppliers to China, according to Chinese trade statistics. The U.S. 

3

All U.S. service exports statistics are in 2004 constant dollars. See appendix I.

4

While Chinese goods trade data are available, bilateral Chinese services data are not 

available to allow an analysis of how the United States compares with other services 

exporters to China. See appendix I. 
Page 4 GAO-06-162 China Trade

share of world exports to China declined in export categories with large 

dollar values, such as Machinery, Electronics, and High-Tech Apparatus, 

which include products like telecommunications equipment, fiber optics, 

and computer parts. Despite the overall decline, the United States gained 

export share in some categories, particularly those related to agricultural 

goods under Prepared Food, Beverages, Spirits, and Tobacco. The U.S. 

share of world exports to China has declined over time partly because 

China is importing goods in industries like electronics, in which local Asian 

countries are increasingly exporting parts to China to be assembled into 

final products. Another reason for the declining United States market share 

is that China has dramatically increased imports of resource-based 

products, such as petroleum, which the United States exports very little of 

in China. Finally, macroeconomic factors, such as exchange rates, and 

industry-specific factors may also affect U.S. firms’ ability to compete with 

other suppliers to China.

Through increased foreign investment in China, U.S. affiliate sales have 

exceeded U.S. exports to China since 2002 because U.S. companies have 

sold more of their goods and services directly to the Chinese market 

through their local affiliates. In 2004, the United States was the 5th-largest 

source of foreign direct investment for China. Overall U.S. investment in 

China has been growing, from $2 billion to $15 billion5

 from 1995 to 2004, 

and is concentrated in the manufacturing sector. U.S. affiliate sales of 

goods and services have become an important avenue for accessing the 

Chinese market. For goods alone, U.S. affiliate sales in China in 20036

 were 

$34 billion versus $29 billion in U.S. exports to China. The relationship for 

services was the reverse, with U.S. affiliate sales at $4 billion compared 

with exports of $6 billion that same year. Growth in investment and affiliate 

sales, particularly for goods, is due at least in part to China’s attraction as a 

growing economy, including its burgeoning domestic market, relatively 

high productivity and low labor costs, and developing infrastructure. The 

relatively smaller investment levels and affiliate sales in services match 

worldwide patterns but, as is the case for services exports, may also be 

because many of China’s WTO commitments for liberalizing services trade 

have only recently or are yet to be phased in and restrictions remain. 

5

Data for U.S. investment in China are provided on an historical cost basis.

6

At the time of publication, data on affiliate sales were available through 2003.
Page 5 GAO-06-162 China Trade

Background Over the last few decades, various political and economic factors have 

contributed to the advancement of commercial relations between the 

United States and China. Trade expanded rapidly after the United States 

and China signed a bilateral trade agreement in 1979. Total U.S.-China trade 

increased from about $8 billion in 1985 to $20 billion in 1990 and to $57 

billion in 1995, according to the Census Bureau. The economic reforms and 

open investment policies that China initiated around the same time led to a 

surge in demand for foreign goods and services to modernize the economy, 

from infrastructure to industries. China’s rapid economic growth, with its 

real gross domestic product growing at an average annual rate of about 9.5 

percent from 1980 to 2000,7

 generated demand for raw materials and basic 

commodities, such as steel, iron, and cotton. Economic growth also 

enhanced the purchasing power of Chinese citizens, especially those living 

in urban areas. This created a relatively large middle class with the ability 

to buy foreign consumer goods and services. In addition, China joined the 

WTO in December 2001, making it subject to the multilateral organization’s 

trade liberalizing requirements.

While U.S. exports to China rose rapidly after 1980, U.S. imports from 

China grew at an even faster pace, creating a large bilateral trade deficit 

that continues to increase today. The deficit in goods ballooned from $6 

million in 1985 to $34 billion in 1995 and to $162 billion in 2004, according 

to the Census Bureau. This U.S. trade deficit with China in 2004 accounted 

for almost 25 percent of the overall U.S. trade deficit. The U.S.-China trade 

imbalance has gained much political and media attention in recent years 

and has become a source of trade friction between the two countries. Some 

policy makers, industry leaders, and labor groups believe that this trade 

imbalance is costing United States jobs in industries trying to compete with 

imports from China. Further, some plicy makers believe that this trade 

imbalance may be due to China’s unfair trade practices or its failure to meet 

all of its WTO obligations. Some policy makers also believe that China’s 

currency is undervalued relative to the U.S. dollar, and thereby inhibits

7

GAO calculations are based on data from China’s National Bureau of Statistics.
Page 6 GAO-06-162 China Trade

greater imports from the United States.8 The causes of the U.S. trade deficit 

with China, or with the rest of the world, while complex, are rooted in part 

in macroeconomic factors at home and abroad, such as national savings 

and investment decisions, growth levels, monetary and fiscal policies, 

changes in domestic and foreign prices, and exchange rates. For example, 

when a country’s budget deficit or domestic spending grows without 

increases in domestic savings, foreign capital inflows can rise, affecting 

exchange rates, leading to an increase in imports and deterioration in the 

trade balance. China, Japan, and Europe have been the largest foreign 

sources of these capital inflows to the United States in recent years. Some 

experts remain less concerned about trade deficits because the inflow of 

foreign capital allows a higher level of investment, benefiting the economy 

as a whole.

China’s accession to the WTO in 2001, a complex process that took 15 

years, resulted in commitments to further open and liberalize its economy 

and offer a more predictable environment for trade and foreign investment 

in accordance with WTO rules. In particular, China committed to gradually 

eliminate or lower tariffs and nontariff barriers on a broad range of goods 

and services.9

 A subsequent survey of U.S. companies showed that they 

expected China’s membership to the WTO to have a positive impact on 

their business operations.10 While U.S. firms are progressively gaining

8

Many experts believe China has maintained an undervalued exchange rate relative to the 

dollar, which would tend to make U.S. exports to China relatively more expensive and 

China’s exports to the United States relatively less expensive. In July 2005, China announced 

some changes in how it manages its exchange rate, and its currency has depreciated slightly 

against the dollar. For a discussion of U.S.-China exchange rate issues, see GAO, 

International Trade: Treasury Assessments Have Not Found Currency Manipulation, but 

Concerns about Exchange Rates Continue, GAO-05-351 (Washington, D.C.: Apr. 19, 2005).

9

For further information about China’s obligations under the WTO, see GAO, World Trade 

Organization: Analysis of China’s Commitments to Other Members, GAO-03-04

(Washington, D.C.: Oct. 3, 2002). 

10See GAO, World Trade Organization: U.S. Companies’ Views on China’s Implementation 

of Its Commitment, GAO-04-508 (Washington, D.C.: Mar. 24, 2004); and World Trade 

Organization: Selected U.S. Company Views About China’s Membership, GAO-02-892

(Washington, D.C.: Sept. 23, 2002).
Page 7 GAO-06-162 China Trade

greater market access in China, many issues remain to be solved, from 

opaque rules and regulations to intellectual property violations.11

Goods Exports to 

China Experienced 

Rapid Growth in the 

Past Decade, Driven by 

China’s Economic 

Growth and Market 

Liberalization

Although still relatively small, China’s market for U.S. goods exports has 

become increasingly important. Export growth to China was widespread 

across 10 major GAO product categories and accelerated in recent years. In 

particular, raw materials and intermediate inputs for manufacturing, such 

as cotton for textiles and apparel, experienced the highest growth in recent 

years. China’s economic development and market liberalization have been 

major contributors to the growth in U.S. exports. 

China Is an Increasingly 

Important and Fast-Growing 

Market for Exports of U.S. 

Goods

Although still small relative to some other U.S. trading partners, China’s 

market for U.S. goods has increased in importance. China progressed from 

the 9th-largest market for U.S. goods exports in 1995 to the 5th-largest in 

2004, after Canada, the EU,12 Mexico, and Japan (see fig. 1). In addition, 

U.S. goods exports to China exceeded those to any individual EU country. 

However, exports to China are still significantly smaller than exports to the 

United States’ largest trading partners, Canada and Mexico. In 2004, $33 

billion, or 4 percent of total U.S. goods exports, went to China, compared 

with $164 billion and $93 billion to Canada and Mexico, respectively. 

11See GAO, U.S.-China Trade: Opportunities to Improve U.S. Government Efforts to 

Ensure China’s Compliance with World Trade Organization, GAO-05-53 (Washington, 

D.C.: Oct. 6, 2004); and Intellectual Property: U.S. Efforts Have Contributed to 

Strengthened Laws Overseas, but Challenges Remain, GAO-04-912 (Washington, D.C.: Sept. 

8, 2004).

12Unless noted otherwise, the EU refers to the 15 countries that have been members of the 

EU over the past 10 years, rather than the current full membership of 25 countries. These 15 

countries include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, 

Italy, Luxembourg, the Netherlands, Portugal, Sweden, Spain, and the United Kingdom. (Ten 

additional members acceded to the EU in 2004, and adding them would change the numbers 

presented in figure 1 only slightly.)
Page 8 GAO-06-162 China Trade

Figure 1: U.S. Goods Export Markets in 2004

On the other hand, China is a significant market, and in some cases even 

the largest market, for certain U.S. products—mainly raw materials for 

manufacturing, building, and agriculture. For example, more than 20 

percent of U.S. exports of oil seeds, zinc, cotton products, and raw hides 

and skins and almost 13 percent of U.S. iron and steel exports were 

destined for China in 2004. Moreover, despite declines in recent years, 

China is still the largest market for U.S. fertilizer exports, according to an 

industry expert, and trade statistics show that fertilizer exports to China 

accounted for more than 35 percent of total U.S. fertilizer exports in some 

years. However, there are major exported products for which China 

remains a small U.S. market, including pharmaceutical products, with 

exports to China of less than 0.5 percent of total U.S. pharmaceutical 

exports, and vehicles, with less than 1 percent of U.S. vehicle exports in 

2004.13 (See app. II, tables 8 and 9, for details.)

13The reasons why China is an insignificant market for some U.S. exports are complex and 

better understanding calls for further investigation. It may be a result of business decisions 

to sell through their foreign affiliates in China rather than through exports, and it may also 

reflect business concerns over intellectual property violations in China. 

Rest of the world

Canada

European Union (15)

Mexico

Japan

4%

China

23%

21%

13%

7%

32%

Source: GAO analysis of Department of Commerce, U.S. Census Bureau data.
Page 9 GAO-06-162 China Trade

Over the past decade, U.S. goods exports to China have grown much faster 

than overall U.S. goods exports. U.S. exports to China tripled in value and 

grew at an annual rate of 13 percent versus 2 percent annually for overall 

U.S. exports, from 1995 to 2004, adjusted for inflation (see fig. 2).14 In 

addition, over the same period, U.S. exports to China grew faster than U.S. 

exports to any other major U.S. trading partner.15 Growth rates for U.S. 

exports over the decade were 3 percent for Canada, 7 percent for Mexico, 

and negative 3 percent for Japan. As a result of the faster growth, China’s 

share of total U.S. exports more than doubled from 2 percent to over 4 

percent from 1995 to 2004. 

Figure 2: Value and Share of U.S. Goods Exports to China 

Note: We adjusted all data for inflation and expressed them in 2004 constant dollars.

14We have adjusted all U.S. goods exports statistics for inflation and expressed them as 2004 

constant dollars. 

15Small countries, such as Iraq and Afghanistan, which previously had very low levels of 

exports, have recently experienced larger increases in U.S. exports.

Source: GAO analysis of Department of Commerce, U.S. Census Bureau data.

0

5

10

15

20

25

30

35

Value of U.S. goods exports to China (dollars in billions)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Share of total U.S. goods exports going to China (percentage)

Dollars in billions Percentage

Year

0

0.7

1.4

2.1

2.8

3.5

4.2

4.9
Page 10 GAO-06-162 China Trade

Export Growth Was 

Widespread among Goods 

Categories and 

Subcategories

While U.S. goods exports to China grew overall during the past decade, 

growth was also consistent at the more detailed product category and 

subcategory level.16 Over a 10-year period, all but 2 of GAO’s 10 categories 

of goods, Aircraft, Vehicles and Other Transportation and Miscellaneous 

and Special Provision Goods, had double-digit annual growth rates from 

1995 to 2004, as shown in table 1. The category with the highest U.S. export 

value, $12.8 billion in 2004, was Machinery, Electronics, and High-Tech 

Apparatus, which grew at an annual rate of 15 percent over the period. 

Aircraft, Vehicles and Other Transportation had one of the lowest annual 

growth rates of 5 percent. 

Much of the growth in U.S. goods exports to China occurred in recent 

years. As shown in table 1, the overall annual growth rate during the second 

5 years of the decade, 2000 to 2004, was 19 percent, as compared with 6 

percent from 1995 to 1999.17 In fact, 7 of the 10 goods categories had higher 

growth rate for the most recent 5-year period than for the previous 5-year 

period. For example, Textiles and Apparel, Leather and Footwear, the bulk 

of which includes raw cotton (including yarn and woven fabric),18 had the 

highest growth rate during the recent 5-year period, or 45 percent annually 

from 2000 to 2004, as compared with a negative 20 percent growth rate in 

the previous 5 years. The goods category with the highest U.S. exports to 

China by value, Machinery, Electronics, and High-Tech Apparatus, grew 

at a rate of 19 percent during the most recent 5-year period versus 9 percent 

during the previous 5 years. 

16The broad product categories, 10 to be specific, are GAO aggregations of the 99 chapter 

headings of the HTS. These aggregations are shown in appendix I, table 7. The subcategories 

are the 99 chapters from the schedule (see app. II, table 14).

17The finding that exports have accelerated in recent years is robust. The results that latter 

years have higher growth rates than earlier years hold true using different break points. 

18This category includes raw cotton and hides and skins, which together account for nearly 

$2 billion of the $2.6 billion in U.S. exports in the category in 2004.
Page 11 GAO-06-162 China Trade

Table 1: U.S. Exports to China by the Annual Growth Rate (1995-2004) and Export Value for 2004

Source: GAO analysis of U.S. Census Bureau trade statistics.

Notes: 

We calculated the annual growth rates by fitting a trend line through the inflation adjusted annual data 

without constraining the line to go through the first year data. We did not use the average of annual 

growth rates because the averages can be skewed by occasional large changes in trade.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

U.S. export growth to China was also widespread at the more detailed 

subcategory level. We found that out of 99 subcategories, exports of 88 

subcategories increased in value over the past decade. Comparing the 

average gain in export value between the first and second parts of the 

decade (1995 to 1999 and 2000 to 2004), we found that most of the value 

increase, 59 percent, was driven by the following 5 subcategories (see app. 

II, table 10, for details): 

• Electric machinery, sound equipment, and television equipment

increased an average of $2 billion per year, 18 percent of the total 

increase.

Dollars in billions

Annual growth rate

(percent)

Goods category

Overall

(1995-2004)

First 5 years

(1995-1999)

Second 5 years

(2000-2004)

Export value 

(2004)

Machinery, electronics, and high-tech 

apparatus 15% 9% 19% $12.8

Chemicals, plastics, and minerals 10 6 20 5.8

Animal and plant products 14 (10) 20 3.4

Aircraft, vehicles and other transportation 5 20 6 2.6

Base metals and articles of base metals 23 2 23 2.6

Textiles, apparel, leather, and footwear 11 (20) 45 2.6

Wood and paper products 17 20 22 1.6

Miscellaneous manufacturing and special 

provision products 4 0 10 0.5

Prepared foods, beverages, spirits, and 

tobacco 18 26 20 0.4

Glassware, precious metals and stones, 

and jewelry 15 14 8 0.3

Total 13% 6% 19% $32.7
Page 12 GAO-06-162 China Trade

• Nuclear reactors, boilers, machinery increased an average of $1.8 

billion per year, 15 percent of the total increase. 

• Oil seeds, grain, seed, fruit and plant increased an average of $1.6 

billion per year, 14 percent of the total increase.19

• Iron and steel increased an average of $800 million per year, 7 percent of 

the total increase.

• Optic photo etc, medical or surgical instruments etc. increased an 

average of $700 million per year, 6 percent of the total increase.

Far fewer subcategories, 9 out of 99, experienced declines in U.S. goods 

exports to China. Comparing the average loss in export value between the 

first and second parts of the decade (1995 to 1999 and 2000 to 2004) we 

found that 88 percent of the export decline was driven by the following 3 

subcategories (see app. II, table 11, for details):

• Fertilizer20 declined an average of $560 million per year, 53 percent of 

the total decline.

• Cereals21 declined an average of $185 million per year, 18 percent of the 

total decline.

19According to the Department of Agriculture officials, soybeans account for the majority of 

the increase in exports in this subcategory.

20The Office of the United States Trade Representative noted various market access issues 

on fertilizer exports to China. These issues include value-added tax rebate and tariff rate 

quota administration. The value-added tax rebate was intended to encourage domestic 

fertilizer production, and the fertilizer exporters complained about the complex tariff rate 

quota administration. An industry expert told us that China’s increasing domestic 

production capacity has driven down the demand for imported fertilizer. For example, 

according to the data from The Fertilizer Institute, China’s capacity for processed 

phosphate, the main U.S. fertilizer export, increased nearly 33 percent from 2001 to 2004. 

One other factor driving the decline of fertilizer export was increasing freight cost, which 

makes importing bulk commodities such as fertilizer more expensive. 

21Large grain surpluses accumulated during the mid- to late-1990s kept China’s grain imports 

unusually low from 1997 to 2003. However, wheat and rice imports both rose in 2004. 
Page 13 GAO-06-162 China Trade

• Animal or vegetable fats, oils etc. and waxes declined an average of 

$176 million per year, 17 percent of the total decline.22

Among the Factors Driving 

U.S. Goods Export Growth 

Are China’s Rapid Economic 

Growth and Market 

Liberalization

Both rapid economic growth in China and the removal and reduction of 

Chinese trade barriers have fueled demand for many types of goods in 

China, particularly raw materials and intermediate inputs for China’s 

booming manufacturing sector. First, U.S. exports have benefited from this 

increasing demand in China. For example, a Department of Agriculture 

report noted that U.S. cotton exports surged primarily because of the rapid 

growth of China’s textile and apparel industry, especially in 2005 after the 

expiration of U.S. and other WTO members’ import quotas under the WTO 

Agreement on Textiles and Clothing. Another contributing factor was 

cotton shortage following a poor Chinese harvest in 2003. In addition, U.S. 

exports of integrated circuits—a key component of consumer electronics, 

such as digital video disk players, cell phones, and global position system 

devices—have increased because China has become a major manufacturer 

of consumer electronics and China’s domestic production of integrated 

circuits can only meet around 10 percent to 15 percent of China’s demand, 

according to a Commerce trade expert. Exports of electronic circuits and 

micro assembling have grown at an annual rate of 47 percent since 1995, 

reaching over $2 billion in 2004. Economic growth in China also has fueled 

demand for energy-related equipment. For example, U.S. exports of gas 

turbine parts to China increased dramatically in recent years, reaching $266 

million in 2004. 

Second, market liberalization has been a factor in the growth of U.S. goods 

exports to China. Reduction or removal of trade barriers has created 

opportunities for foreign exporters to access China’s market. The United 

States concluded bilateral negotiations with China on WTO accession in 

1999. Then, as part of its 2001 WTO accession agreement, China committed 

to reducing or eliminating a variety of market access barriers to foreign 

products. In its agreement, China made specific commitments on the tariff 

rates for more than 7,000 products covering all imports as well as 

commitments on trade-distorting practices, such as state trading and 

quotas, affecting more than 900 products. By 2010, the end of the WTO 

commitment phase-in period, China’s overall average tariff is scheduled to 

22According to Department of Agriculture officials, the decline in this subcategory is a 

reflection of increasing palm oil imports from Southeast Asia, as well as a dramatic increase 

in China’s domestic oil seed crushing and refining capacity. 
Page 14 GAO-06-162 China Trade

be less than 10 percent. China has also committed to removing certain 

nontariff barriers, such as quotas and licensing, by 2005.

While Overall Services 

Exports to China Grew 

during the Past 10 

Years, Growth among 

Services Categories 

Varied 

China is a small but growing market for U.S. services. From 1995 to 2004, 

China moved from the 12th- to the 7th-largest recipient of services exports, 

and U.S. services exports to China increased both in dollar value and as a 

share of U.S. world exports. However, U.S. services exports are relatively 

small, $7 billion in 2004, compared with goods exports of $33 billion in 

2004. Like goods, U.S. services exports to China grew faster than U.S. 

services exports to the rest of the world. The annual growth rates for 

exports varied widely among the 5 main services categories and their 

subcategories. The services categories that grew the fastest over the 

decade were Royalties and License Fees and Passenger Fares. Among the 

faster-growing subcategories were telecommunications and financial 

services, while other subcategories, such as business, professional, and 

technical services, experienced much slower growth. Also like goods, 

overall increases in U.S. services exports are likely due to the sharp growth 

of the Chinese economy and the resulting increased demand for services. 

Slower export growth in some categories may be due to relatively slower 

trade liberalization in China for services. For example, many WTO services 

commitments have only recently come into effect or are not yet scheduled 

to be phased in. 

China Is a Growing 

Destination for U.S. 

Services Exports, Which 

Grew Faster Than Overall 

U.S. Services Exports 

Although still small, China is a growing market for U.S. services exports, 

which grew faster than U.S. services exports to the rest of the world from 

1995 to 2004. In 2004, China received 2 percent of total U.S. services 

exports and was the 7th-largest market for U.S. services, behind the EU23 at 

35 percent, Japan at 11 percent, Canada at 9 percent, Mexico at 6 percent, 

and South Korea and Switzerland each at 3 percent (see fig. 3). In 1995, 

China was the 12th-largest. Since then, China has surpassed Australia, 

Hong Kong, Taiwan, Brazil, and Singapore, which were among the top 12 

markets for services exports in 1995.

23For 2004, BEA only provides data on U.S. exports of services to all 25 current EU member 

countries, and does not break out the 15 original members. The current 25 EU member 

countries include Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, 

France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the 

Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. 
Page 15 GAO-06-162 China Trade

Figure 3: Top Markets for U.S. Services Exports in 2004

Note: We adjusted all data for inflation and expressed them in 2004 constant dollars.

U.S. exports of services to China have grown significantly, with growth 

moderating somewhat in recent years. The annual growth rate for services 

exports to China was 10 percent from 1995 to 2004, which was slower than 

the growth rate for goods (about 13 percent) and faster than the overall 

growth rate for U.S. services exports to the world (3 percent). As shown in 

figure 4, from 1995 to 2004, U.S. services exports to China more than 

doubled in value from $3 billion to $7 billion, and China’s share of total U.S. 

services exports to the world also grew from 1 percent to over 2 percent. 

U.S. services exports grew faster in the first part of the period—services 

exports grew about 11 percent from 1995 to 1999 versus 6 percent from 

2000 to 2004.

2%

China

3%

Switzerland

3%

South Korea

6%

Mexico

Canada

Japan

European Union (25)

Rest of the world

31%

35%

11%

9%

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.
Page 16 GAO-06-162 China Trade

Figure 4: Value and Share of U.S. Services Exports to China and as a Share of Total 

U.S. Services Exports, 1995-2004

Note: We adjusted all data for inflation and expressed them in 2004 constant dollars.

U.S. Services Exports to 

China Grew under All Major 

Categories, with Some 

Variation

While services exports grew overall over the past decade, growth rates 

varied among major categories and subcategories.24 From 1995 to 2004, 

U.S. services exports to China grew in each of the 5 main services 

categories: Travel, Passenger Fares, Other Transportation, Royalties and 

License Fees, and Other Private Services. (See app. III for a full description 

of these categories and their subcategories). As shown in table 2, Royalties 

and License Fees grew the fastest over time, with an annual growth rate of 

22 percent from 1995 to 2004. While all services categories grew over time, 

growth rates varied from the first half of the 10-year period to the second 

half of the period. For example, services in the Other Transportation

category had an annual growth rate of 11 percent for the whole period and 

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

Value of U.S. services exports to China (dollars in billions)

Share of total U.S. services exports to China (percentage)

Dollars in billions Percentage

Year

0

1

2

3

4

5

6

7

8

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

0

0.3

0.6

0.9

1.2

1.5

1.8

2.1

2.4

24Services categories and subcategories are those used by BEA. See appendix III for full 

definitions of these categories and subcategories.
Page 17 GAO-06-162 China Trade

declined by 4 percent from 1995 to 1999, but grew quickly at a rate of 26 

percent from 2000 to 2004. 

Table 2: Five Main U.S. Services Exports to China by Annual Growth Rate (1995-2004) and Export Value for 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

Notes: 

For information about services categories and their definitions, see appendix III. 

We adjusted all data for inflation and expressed them in 2004 constant dollars.

The U.S. government also collects some data on sales of services to China 

at the subcategory level. As shown in table 3, all but 1 subcategory under 

the main category of Other Private Services grew overall from 1995 to 

2004.25 Growth ranged from 24 percent for insurance services to 8 percent 

for the business, professional, and technical services category, and there 

was a 1 percent decline for Other Private Services. U.S. export growth 

rates under some of these subcategories also varied between the two 

periods. For example, exports of financial services grew 12 percent in the 

first period, from 1995 to 1999, and 27 percent in the second period, from 

2000 to 2004. One large subcategory for services sales was education, 

which comprised about half the value of Other Private Services exports, 

$1.3 billion in 2004, and consists of tuition and living expenses of foreign 

students enrolled in U.S. colleges and universities. 

Dollars in millions

Annual growth rate (percent)

Services category

Overall

(1995-2004)

First 5 years 

(1995-1999)

 Second 5 years 

(2000-2004)

 Export value

(2004)

Royalties and license fees 22% 37% 33% $928

Passenger fares 17 64 (17) 221

Other transportation 11 (4) 26 1,804

Other private services 11 12 9 3,392

Travel 1 16 (9) 894

Total 10% 11% 6% $7,239

25At this level, however, only unaffiliated data are available. BEA does not publish countryspecific affiliated services data at the subcategory level.
Page 18 GAO-06-162 China Trade

Table 3: Subcategory of U.S. Services Exports to China by the Annual Growth Rate (1995-2004) and Export Value for 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

Notes: 

For information about services categories and their definitions, see appendix III. 

We adjusted all data for inflation and expressed them in 2004 constant dollars.

a

For other services, growth rates are estimated due to unavailable data for some years.

The U.S. government collects further data on the subcategory of business, 

professional, and technical services, which encompasses a number of key 

areas, including legal, advertising, and computer and information

services. As shown in table 4, from 1995 to 2004, growth rates in exports in 

these subcategories varied from a 2 percent annual decline for 

construction, architectural, and engineering services, to a 21 percent 

annual growth for research and development and testing services. 

Comparing the first and second half of the decade in table 4, exports in 

these services appear to be somewhat volatile, since some industries 

experienced declines and then growth or vice versa during the two periods. 

However, because exports for subcategories under business, professional, 

and technical services are relatively low (less than $100 million in most 

cases) changes from one year to the next can drastically affect overall 

growth rates. 

Dollars in millions

Annual growth rate (percent)

Subcategory of other private services 

Overall

 (1995-2004)

First 5 Years 

(1995-1999)

Second 5 Years

 (2000-2004)

Export value 

(2004)

Insurance services 25% 14% 20% $23

Financial services 22 27 12 165

Telecommunications 14 10 9 90

Education 10 10 6 1,260

Business, professional, and technical services 8 10 9 1,216

Othera (1) (9) 5 127

Total 8% 9% 10% $2,882
Page 19 GAO-06-162 China Trade

Table 4: Subcategory of U.S. Services Exports to China by the Annual Growth Rate (1995-2004) and Export Value for 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data

Notes:

For information about the services categories and their definitions, see appendix III. 

We adjusted all data for inflation and expressed them in 2004 constant dollars.

a

BEA did not publish a figure for advertising for 1995, so growth rates are calculated from 1996 to 

2004.

U.S. Services Exports Aided 

by Chinese Economic 

Growth but Limited by 

Slower Trade Liberalization 

to Date 

Like goods, the growth in U.S. services exports to China over the past 

decade was driven in part by China’s sharp economic expansion. However, 

in contrast to goods, the overall value of services exports is smaller and 

individual categories and subcategories experienced more variable growth. 

The smaller value of U.S. services exports to China is consistent with world 

trade patterns with the United States. Trade in services tends to be smaller 

than trade in goods in part because many services require some type of 

direct contact or local presence and thus are harder to provide across 

international borders. In addition, China is following a common trend 

among developing countries, which usually have relatively small services 

sectors, according to the World Bank. However, the smaller overall value of 

services exports and variable growth rates among services categories may 

also be due to the fact that China’s services sector is yet to be fully 

liberalized. For example, most market access commitments for services are 

to be phased in by 2007. Finally, China’s export-oriented growth has 

depended on the industrial sector, rather than services.

Dollars in millions

Annual growth rate (percent)

Subcategory of business, professional, and 

technical services 

Overall 

(1995-2004)

First 5 Years

(1995-1999)

Second 5 Years

(2000-2004)

Export value

(2004)

Research and development and testing 21% 25% 7% $14

Legal 15 24 9 60

Advertisinga 12 12 36 6

Management, consulting, and public relations 9 (1) 36 53

Installation, maintenance, and repair of 

equipment 6 (5) 5 199

Computer and information 5 1 11 48

Construction, architectural, and engineering (2) 6 (1) 328

Total 8% 10% 9% $1,216
Page 20 GAO-06-162 China Trade

While China’s WTO commitments for services are to provide foreign 

services providers with increased access to a number of sectors, including 

business services, communications services, financial services, and 

tourism- and travel-related services, many of these commitments have only 

recently come into effect or are yet to be phased in. For example, under 

financial services, insurance was scheduled to be fully liberalized over a

5-year period, thereby relaxing many restrictions, such as selective 

licensing processes and geographic limitations. In another example, in the 

financial services area, U.S. banks will be able to provide local (Chinese) 

currency services without geographic and client limitations by 2006; and 

telecommunications is also scheduled to be liberalized by 2007, when 

foreign providers will be allowed to offer a broad array of 

telecommunications services with no geographic restrictions, although 

only through joint ventures with Chinese partners. International Trade 

Commission officials contend that joint venture requirements may, in part, 

explain the smaller value for U.S. services exports compared with goods 

exports to China. Office of the United States Trade Representative (USTR) 

officials noted that implementation problems have inhibited market access 

for services.26

However, a portion of U.S.-China services trade does not depend upon 

market access. For example, some U.S. services exports are delivered to 

Chinese residents by virtue of the Chinese residents traveling to the United 

States to consume these services. Thus, although exports in the 

subcategory of education are among the largest in terms of dollar value, a 

good portion of those exports are tuition and living expenses of foreign 

students enrolled in U.S. colleges. Similarly, a portion of 

telecommunications exports is international calls from China to the United 

States. 

Finally, a good portion of services trade depends not only upon exports, but 

also upon foreign direct investment and establishing commercial presence, 

or selling services through local U.S. affiliates.

27 This is also the case in 

China. A Commerce trade expert told us that cross-border trade in services 

is small relative to the Chinese domestic market, since many services must 

26For a thorough discussion of Chinese WTO compliance problems, see United States Trade 

Representative, 2004 Report to Congress on China’s WTO Compliance (December 2004).

27A U.S. affiliate abroad is an incorporated or unincorporated enterprise in which an 

investor, who is resident in another economy, owns a stake that permits a lasting interest in 

the management of that enterprise (an equity stake of 10 percent).
Page 21 GAO-06-162 China Trade

be provided by firms located in China, and the real potential for growth in 

services trade is in affiliate sales. For example, while exports in 

telecommunications are growing, the real potential is in providing 

telecommunications services to China’s domestic market, such as 

improving telephone service, which requires setting up local operations. In 

another example, according to an official from the Coalition of Service 

Industries, business, professional, and technical services are especially 

important to coalition members as well as to the Chinese government 

because the Chinese are anxious to form joint ventures to increase their 

expertise. The official said that it took a smaller investment to locate 

services in China compared with a manufacturing plant, especially for 

financial services, where coalition members preferred to do business 

through joint ventures and branches.28

U.S. Goods Exports 

Have Not Kept Pace 

with Other Nations’ 

Exports to China

Although U.S. goods exports to China have grown rapidly, other countries, 

particularly a few Asian countries, have experienced even higher export 

growth to China, resulting in a drop in total U.S. market share of total world 

exports to China.

29 Similarly, other large suppliers to China, such as the EU 

and Japan, have experienced declines in their shares, while certain Asian 

countries, such as South Korea and Taiwan have increased their shares of 

overall exports to China. The U.S. decline covers a wide range of products, 

including autos and parts, plastics and organic chemicals, and optical 

machinery. However, the United States did increase export share in other 

products, particularly agricultural goods, such as prepared meats and fish, 

and preserved fruits and vegetables.

30 The U.S. share of exports to China 

has declined partly due to the rise of existing smaller exporters and partly 

due to the growing number of new countries exporting to China. In 

particular, as local Asian production processes became more integrated, 

other East Asian and Southeast Asian countries became larger suppliers of 

China’s growing manufacturing and assembly operations. Another reason 

28U.S. foreign direct investment and affiliate sales in China are discussed later in this report.

29Bilateral Chinese services data are not available to allow an analysis of how the United 

States compares with other services exporters to China. Therefore, the discussion in this 

section is focused solely on goods and not services. See appendix I.

30Our analysis of the U.S. share of world exports to China is based on official Chinese trade 

statistics, which we express in nominal dollars. We were not able to identify an appropriate 

trade deflator for Chinese trade statistics in order to remove the potential effect of inflation 

or deflation on the values. 
Page 22 GAO-06-162 China Trade

for the declining market share was the quickly increasing Chinese imports 

of natural resources, such as petroleum, for which the United States is not 

a major supplier to China. Finally, other macroeconomic and industryspecific factors may have played a role in the declining U.S. market share. 

U.S. Share of Chinese 

Import Market Has Declined 

over the Last Decade

Although the value of U.S. goods exports to China has increased every year 

for the past 10 years, the U.S. share of total exports from all countries to 

China has declined. The U.S. share of world goods exports to China fell 

from about 12 percent in 1995 to about 9 percent in 2004,31 according to 

Chinese trade statistics. Figure 5 shows the values of world and U.S. goods 

exports to China as well as the U.S. percentage of world exports to China. 

As figure 5 shows, overall world exports to China have grown significantly, 

more than quadrupling from about $130 billion in 1995 to about $522 billion 

in 2004 (unadjusted for inflation), according to Chinese trade statistics.

31See appendix I for a discussion of the reliability of Chinese trade statistics. We use Chinese 

trade statistics in this section in order to compare how U.S. exports to China fare relative to 

other countries’ exports to China. U.S. and Chinese trade statistics differ substantially in the 

value of trade they report between the two countries.
Page 23 GAO-06-162 China Trade

Figure 5: U.S. and World Goods Exports to China and U.S. Share of World Goods 

Exports to China, 1995-2004

Notes:

Values for U.S. exports to China differ according to whether they are reported by China or by the 

United States. The figure reports the Chinese statistics in order to compare them with overall exports 

to China. See appendix I for more discussion of these statistics. 

We report Chinese trade statistics in nominal dollars. We were not able to identify an appropriate trade 

deflator for Chinese statistics in order to remove the potential effect of inflation or deflation on the 

values. See appendix I for more discussion of these statistics. 

At the same time, other large suppliers to China also experienced declines 

in their share of world goods exports to China. Japan and the EU lost 

overall export share; although, like the United States, they had growing 

exports to China during the past decade. For example, Japan’s share fell 

from 22 percent to 18 percent and the EU’s share fell from 16 percent to 13 

percent from 1995 to 2004. In contrast, other Asian countries, such as 

Indonesia, South Korea, Malaysia, Singapore, and Taiwan, increased their 

export share and, in some cases, surpassed the United States. Regionally, 

Indonesia, Malaysia, and Singapore are all members of the Association of

Source: GAO analysis of official Chinese trade statistics.

0

100

200

300

400

500

600

U.S. exports to China (dollars in billions)

World exports to China (dollars in billions)

Year

Dollars in billions Percentage

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

U.S. share of world exports to China (percentage)

0

3

6

9

12

15

18
Page 24 GAO-06-162 China Trade

Southeast Asian Nations (ASEAN),32 which have increasingly integrated 

their production and trade with China.

33 The United States was the 3rdlargest exporter to China in 1995, but fell to the 6th-largest in 2004, as 

shown in figure 6. South Korea, Taiwan, and the ASEAN surpassed the 

United States and drew close to overtaking the EU by 2004. The remaining 

countries as a group increased their share of China’s market as well, from 

about 22 percent in 1995 to 24 percent in 2004. Russia was the 7th-largest 

exporter to China in 2004 (at about 2 percent), followed by Hong Kong and 

Australia.

34 Japan and the EU have, since at least 1995, been larger 

suppliers to the Chinese market than the United States.

Figure 6: Share of Goods Exports to China for the Top Six Suppliers, 1995-2004

32The ASEAN has 10 member countries, including Brunei Darussalam, Cambodia, Indonesia, 

Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

33In the discussion and figure that follow, we calculate trade statistics for ASEAN countries 

as a group.

34Chinese trade statistics include “China” as one of the supplying countries. This represents 

the reimports of Chinese-produced products that have been temporarily exported outside of 

China, but were then reimported without substantial transformation in the receiving 

country. We exclude these reimports from our analysis of Chinese trade statistics.

Percentage

Year

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: GAO analysis of official Chinese trade statistics. 

0

5

10

15

20

25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Taiwan

South Korea

United States

Japan

European Union (15)

Association of Southeast Asian Nations
Page 25 GAO-06-162 China Trade

Most U.S. Export Categories 

Have Lost Share of World 

Goods Exports to China

Despite overall growth in exports to China, the United States lost share of 

world goods exports to China in 7 out of the 10 goods categories between 

the first and second half of the 10-year period (average annual share 1995 to 

1999 versus 2000 to 2004),35 as highlighted in table 5. For example:

• Aircraft, Autos, and Other Transportation: U.S. share dropped 7 

percentage points from 28 percent to 21 percent, even though U.S. 

exports grew annually on average by 5 percent between 1995 and 2004.

• Chemicals, Plastics, and Minerals: U.S. share fell 4 percentage points, 

although U.S. exports grew annually on average by 10 percent, between 

1995 and 2004. 

• Machinery, Electronics, and High-Tech Apparatus: U.S. share lost 3 

percentage points, despite the fact that U.S. exports grew annually on 

average by 15 percent between 1995 and 2004, and this was the largest 

category by value of U.S. exports, $13 billion in 2004.

Table 5: Changes in U.S. Share of World Exports to China, 1995-2004; and U.S. Goods Exports to China, 2004

35Since annual export shares can vary a great deal from year to year, averaging the two 5-

year periods and comparing them removes some of this annual fluctuation and focuses on 

broader changes. For verification, we also examined the annual and 3-year average export 

shares to confirm the results presented here.

Dollars in millions

Average U.S. share of world exports to China (percent)

Goods category

Percentage

point change

(B minus A)

First 5 years 

(1995-1999)

(A) 

Second 5 years 

(2000-2004)

(B) 

U.S. goods 

exports to China

 (2004)

Aircraft, autos, and other transportation (7)% 28% 21% $2,630

Chemicals, plastics, and minerals (4) 11 7 5,760

Machinery, electronics, and high-tech apparatus (3) 13 10 12,800

Glassware, precious metals and stones, jewelry (3) 10 7 328

Miscellaneous manufacturing (1) 8 7 510

Base metals and articles of base metals (1) 6 5 2,620

Wood and paper products (1) 15 14 1,640

Textiles, apparel, leather, and footwear 0 7 7 2,550
Page 26 GAO-06-162 China Trade

Source: GAO analysis of Chinese and U.S. Census Bureau trade statistics.

Notes: 

Broad product categories are GAO aggregations of the chapters from the U.S. Harmonized Tariff 

Schedule of the United States. For more information on these categories, see appendix I, table 7. 

Shaded product categories indicate a decline in U.S. share of world exports to China.

The U.S. share of world exports are based on Chinese trade statistics. 

U.S. exports to China in 2004 are from U.S. statistics that we adjusted for inflation and expressed in 

2004 constant dollars. 

At a more detailed subcategory level, changes in U.S. export share were 

mixed. Within the 10 goods categories, we found that a slight majority of 

individual subcategories (55 out of 99 subcategories) experienced a decline 

in the U.S. share of world exports to China.

36 Some subcategories for which 

U.S. market share declined had high export values and were major 

contributors to export increases (see app. II, table 12, for the top 20 

subcategories in terms of market share decline). For example:

• Oil seeds, with $2.4 billion in exports in 2004, lost 12 percentage points 

in share between the first and second half of the decade, although it 

contributed to 14 percent of the total export increase over the period.

• Optic, photo, medical, with $2 billion in exports in 2004, lost 6 

percentage points in share between the first and second half of the 

decade, although it contributed to 6 percent of the total export increase 

over the period.

Goods category

Percentage

point change

(B minus A)

First 5 years 

(1995-1999)

(A) 

Second 5 years 

(2000-2004)

(B) 

U.S. goods 

exports to China

 (2004)

Prepared food, beverages, spirits, and tobacco 3 13 16 406

Animal and plant products 1 24 25 3,410

Total (3)% 12% 9% $32,654

(Continued From Previous Page)

Dollars in millions

Average U.S. share of world exports to China (percent)

36Of the 99 subcategories, 42 grew in their export share from the first half of the decade 

(1995 to 1999) compared with the second half (2000 to 2004). The subcategories are the 99 

chapters from the HTS schedule (see app. II, table 14).
Page 27 GAO-06-162 China Trade

The two subcategories that contributed the most to export increases 

between the first and second half of the decade also lost market share, but 

to a lesser extent.

• Electrical machinery, with $5 billion in exports in 2004, lost 2 percent 

market share, although it contributed to 18 percent of the total export 

increase over the period. This subcategory includes high-tech products, 

such as telecommunications equipment, fiber optics, and computer 

parts. 

• Machinery (other than electrical), with $6 billion in exports in 2004, lost 

2 percent market share, although it contributed to 15 percent of the total 

export increase over the period.

Many U.S. Agricultural 

Goods Have Increased Their 

Share of World Exports to 

China

Only categories related to agricultural goods have gained or maintained 

U.S. worldwide market share in China, with the exceptions previously 

noted. The largest overall increase was in the category of Prepared Food, 

Beverages, Spirits, and Tobacco, in which the United States increased its 

share of world exports to China by 3 percentage points, from 13 percent to 

16 percent over the decade (see table 5). The U.S. export increase in this 

category moved the United States from the 4th-largest supplier to China in 

1995 to the 2nd-largest supplier of that category in 2004, behind Peru (see 

fig. 7). According to the Department of Agriculture, exports to China from 

Peru are primarily fish meal. 
Page 28 GAO-06-162 China Trade

Figure 7: Major Suppliers’ Share of World Exports to China of Prepared Food, 

Beverages, Spirits, and Tobacco, 1995-2004

For the other 2 agriculture-related categories, the United States increased 

its share by about 1 percent in Animal and Plant Products, while its share 

remained relatively stable in Textiles, Apparel, Leather, and Footwear at 

about 7 percent over the decade, on average. (See app. II, table 13, for the 

20 subcategories by increase in the U.S. share of world goods exports to 

China.)

Again, at the more detailed subcategory level within these broad 

agricultural categories, changes in export share were mixed.

37 Most 

subcategories under Prepared Food, Beverages, Spirits, and Tobacco have 

increased their world export share in China. For example:

• Prepared meats and fish increased by 20 percentage points, from 11 

percent to 31 percent over the decade.

37Appendix II, table 13, shows the top 20 subcategories by increase in U.S. share of world 

exports to China.

Percentage

Year

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: GAO analysis of official Chinese trade statistics.

0

5

10

15

20

25

United States

Peru

European Union (15)

Association of Southeast Asian Nations
Page 29 GAO-06-162 China Trade

• Preserved foods, including a wide range of fruits, vegetables, nuts, and 

juices, grew by 14 percentage points, from 31 percent to 45 percent over 

the decade.

However, some subcategories under animal and plant products

experienced mixed results. For example:

• Lac, gums and resins grew in share over the decade from 16 percent to 

32 percent; edible fruits and nuts increased from 7 percent to 15 

percent.

• Edible vegetables and certain roots and tubers declined from 19 

percent to 8 percent; animal or vegetable fats, oils etc. and waxes

declined from 13 percent to 3 percent. 

Growing Asian Production, 

Oil Imports, and 

Macroeconomic Factors 

Were among the Reasons for 

Decreased U.S. Export 

Share in China 

Over the past decade, the U.S. share of world exports to China has declined 

for a variety of reasons. The loss in the U.S. share of worldwide exports to 

China has occurred as the volume of exports from smaller exporters has 

grown and the number of countries exporting to China has increased. 

These trends are due to multiple factors. For example, greater integration 

of Asian production processes has helped certain other Asian countries 

become larger suppliers of China’s growing manufacturing and assembly 

operations. Also, China’s resource-based imports, including those from oilproducing countries, rose sharply as its rapid economic growth increased 

demand for raw materials. In addition, macroeconomic factors that 

influence the overall U.S. trade deficit, including exchange rates with China 

and other Asian countries, as well as industry-specific circumstances, are 

likely to have affected the overall U.S. export share. 

Individual countries, particularly those from Asia, have increased their 

share of world exports to China at the expense of the United States and 

other large suppliers. South Korea, Taiwan, and ASEAN countries, 

including Indonesia, Malaysia, and Singapore, have all increased their 

export share overall and in many particular products (e.g., autos and parts, 

and electronics). There are several reasons why these countries may have 

increased their market share in China. Regional economies in Asia have 

increasingly integrated their production processes, producing parts for 

products in one location and shipping them to another for assembly. China 

has become a key component of this process due to its relatively low labor 

costs and large-scale production potential. For example, China is a major 

producer of electronic products, such as computers and video players, 
Page 30 GAO-06-162 China Trade

which may be sold domestically or exported worldwide. As an indication of 

this, China’s largest import and export subcategory is electrical machinery, 

which includes finished products, such as consumer electronics, as well as 

components used in their production, such as electronic circuits.

In addition, this greater integration of production processes can affect 

trade trends. For example, U.S. components and parts exports first sent to 

other countries and incorporated into those countries’ exports to China are 

not captured in U.S.-China bilateral trade statistics. Trade statistics only 

show direct imports and exports between countries. For products that are 

produced by a process that involves a series of locations, trade statistics 

generally do not capture the value of inputs coming from locations other 

than the last point of export. Therefore, for some U.S.-made components, 

such as semiconductors, that are modified and added to in Malaysia,

Singapore, and the Philippines before being sent to China for use in cell 

phones and computers, trade statistics do not generally count them as U.S. 

exports to China, but as U.S. exports to Singapore or the Philippines. 

Furthermore, as the number of countries that export to China expands,

38 1 

export category that is particularly relevant is chemicals, plastics, and 

minerals, which had the 2nd-highest U.S. export value in 2004 and includes 

resource-based products, particularly petroleum products, which United 

States exports very little to China. All major suppliers lost overall export 

share in this category as a wider range of countries supplied exports in this 

category between 2002 and 2004. Petroleum products are one of the fastestgrowing Chinese imports in recent years and accounts for a substantial 

share of overall Chinese imports. In fact, imports of crude oil from 

petroleum and bituminous minerals39 was the 2nd-largest Chinese import 

by value in 2004, worth about $34 billion and accounting for over 6 percent 

of total Chinese imports, according to Chinese statistics. Many oilproducing countries’ exports to China grew faster than the average annual

38Between 1995 and 1997, the number of countries that exported to China increased from 

203 to 224. Between 1995 and 1997, the top 10 exporters accounted for 74 percent of world 

exports to China. This percentage fell to 70 percent between 2002 and 2004. Similarly, the 

top 20 suppliers dropped from 89 percent of world exports to China between 1995 and 1997 

to 85 percent between 2002 and 2004. 

39Crude oil from petroleum and bituminous minerals is a product description at the fourdigit level of detail in the HTS.
Page 31 GAO-06-162 China Trade

growth rate of 27 percent for all countries from 2000 to 2004. Table 6 lists 

examples of oil-producing countries with high growth rates.40

Table 6: Examples of Oil-Producing Countries with Higher-Than-Average Export 

Growth Rates to China, 2000-2004

Source: GAO analysis of official Chinese trade statistics.

Note: We reported Chinese trade statistics in nominal dollars.

Finally, there are also a variety of other broad macroeconomic factors, 

such as exchange rates as well as industry-specific circumstances that may 

have affected the U.S share of world exports to China. For example, many 

economists believe the Chinese renminbi/yuan is undervalued relative to 

the U.S. dollar, and certain Asian currencies that experienced devaluations 

during the Asian financial crisis may therefore have a competitive 

advantage in China. A higher-valued dollar would be expected to have a 

dampening effect on U.S. exports to China by making U.S. exports more 

expensive in the Chinese market relative to other countries’ exports. Also, 

industry-specific circumstances may provide certain countries with export 

advantages over those of the United States. For example, some industries’ 

companies from other countries may have been operating in the Chinese 

economy for longer than U.S. companies and may be gaining in export 

share due to their greater experience. Also, according to one Commerce 

specialist, some countries have provided “tied-aid” to China in which they 

provide financial support for certain types of investments such as 

environment projects, if their companies, rather than U.S. companies, are 

able to supply the materials and components for the project. Also, in the 

40We report growth rates based on Chinese trade statistics in nominal dollars since there is 

no appropriate deflator readily available. However, because the time span is only 5 years, 

the real growth rate is not likely to be significantly different. 

Dollars in millions

Country

Annual growth rate 

(2000-2004)

Export value

(2004)

Chad 1,100% $223

Congo 59 1,569

Saudi Arabia 40 7,518

Angola 35 4,718

United Arab Emirates 33 1,305
Page 32 GAO-06-162 China Trade

agricultural sector, Chinese concerns about animal and plant diseases may 

restrict, at least temporarily, access of U.S. agricultural products and 

reduce U.S. export share.

U.S. Investment in 

China Has Increased, 

and Affiliate Sales 

Surpassed U.S. Exports 

Through increased foreign direct investment in China, U.S. affiliate sales 

have exceeded U.S. exports to China, since U.S. companies have 

increasingly sold their goods and services directly to the Chinese market 

through their local affiliates. Although small, U.S. investment in China has 

been growing and investment levels have been similar to that of China’s 

other trading partners. U.S. companies generally concentrated their 

investments in China in the manufacturing sector, in industries such as 

transportation equipment, chemicals, and computers and electronic 

products. U.S. investment in China funds the creation of U.S. affiliates, who 

then sell in China and to other countries, including the United States, and 

U.S. affiliate sales of goods and services have become an important avenue 

for accessing the Chinese market. In fact, the value of U.S. affiliate sales in 

China has exceeded the value of U.S. exports to China since 2002.41 Factors 

such as the growing Chinese market, lower labor costs, and China’s WTO 

accession have allowed U.S. companies to increase their investment and 

sales in China, although some challenges remain. 

U.S. Foreign Direct 

Investment in China Has 

Grown, Mostly in 

Manufacturing

U.S. foreign direct investment in China, although relatively small as a share 

of total U.S. foreign investment, has grown and is concentrated mainly in 

manufacturing (see fig. 8). In 2004, China ranked 12th as a recipient of 

U.S. investment, and the cumulative stock of U.S. investment in China was 

$15 billion.42 This was a relatively small amount compared with U.S. 

investment going to other major U.S. trading partners. For example, in 

2004, the cumulative stock of U.S. investment in the EU, Canada, and Japan 

was $952 billion, $217 billion, and $80 billion, respectively. 

41Sales by U.S. affiliates are the total value of sales by U.S. majority-owned affiliates located 

in China to the Chinese market. Data on sales by all U.S. affiliates (majority and minorityowned) are not available for just the Chinese market, but include any sales by these 

affiliates to China or another country. 

42The U.S. foreign direct position in China is measured on an historical cost basis by BEA. 

The historical cost basis represents the book value of U.S. direct investor’s equity in, and net 

outstanding loans to, their foreign affiliates.
Page 33 GAO-06-162 China Trade

However, U.S. investment in China has grown. For example, the cumulative 

stock of U.S. investment in China grew from $2 billion in 1995 to $15 billion 

in 2004. In addition, according to Chinese statistics, U.S.-realized annual 

investment flows43 into China grew at about 6 percent annually from 1995 

to 2003. This growth rate matched that of the EU (also 6 percent) and 

slightly exceeded that of Japan (4 percent) during the same period.

Figure 8: U.S. Foreign Direct Investment in China, Value of Cumulative Stock, and 

Share of Total U.S. Investment, 1995-2004

U.S. investment levels in China were similar to those of its other trading 

partners. According to Chinese statistics, in 2003, 8 percent of China’s 

realized annual investment flows came from the United States, compared 

with 7 percent from the EU, 8 percent from Korea, 9 percent from Japan, 6 

43The Chinese Statistical Yearbook reports the total amount of realized foreign direct 

investment, which represents the annual flow of investment into China, rather than the 

cumulative stock. 
Page 34 GAO-06-162 China Trade

percent from Taiwan, and 5 percent from the ASEAN. While Chinese 

statistics show Hong Kong as providing 34 percent of investment in China, 

this figure may be inflated by mainland Chinese investment going through 

Hong Kong. In 2003, the United States was the 5th-largest investor with $4 

billion of realized annual investment flows in China, behind Hong Kong, the 

British Virgin Islands,

44 Japan, and Korea (see fig. 9). 

Figure 9: Realized Annual Investment Flows in China, from the World, 2003

Notes: 

Realized investment represents the actual annual flow of investment. For example, in a 3-year contract 

to invest $100 million, the realized annual investment might be $25 million the 1st year, $50 million the 

2nd year, and $25 million the 3rd year.

Total foreign direct investment in China in 2003 was $53.5 billion.

44Some foreign firms, including U.S. companies, are registered in the BritishVirgin Islands 

for taxes.

Other countries

Association of Southeast Asian Nations

Taiwan

European Union (15)

United States

South Korea

Japan

British Virgin Islands

Hong Kong

5%

7%

6%

8%

8%

9% 12%

34%

11%

Source: GAO analysis of official statistics from the China Statistical Yearbook.
Page 35 GAO-06-162 China Trade

BEA classifies data on U.S. investment abroad by industry, using a 

classification system that is based on sales information, which companies 

report in surveys. BEA collects data on foreign affiliates’ production of 

goods, sales of goods, and services. The major industries for which it 

collects data include, among others, mining, utilities, and manufacturing

and wholesale trade. In 2004, U.S. investment in China was concentrated in 

manufacturing, with over half of the cumulative stock of U.S. investment 

in China, or $8.2 billion. Other broad industry groupings in which U.S. 

companies invested their cumulative stock in China in 2004 included 

wholesale trade at $1.8 billion, and mining at $1.7 billion (see app. IV, table 

15). BEA also classifies data on U.S. investment by subcategories in the 

manufacturing sector. Examples of U.S. investment in manufacturing 

subcategories included $1.8 billion in the transportation equipment

industry, $1.6 billion in the chemicals industry, and $1.3 billion in the 

computers and electronic products industry (see app. IV, table 16). 

U.S. Affiliate Sales in China 

Surpassed U.S. Exports to 

China

With their $15 billion investment in Chinese manufacturing and other 

sectors, U.S. companies have established local affiliate companies that 

increasingly sold their goods and services to the Chinese market. In 2003, 

U.S. majority-owned affiliate companies sold about 75 percent of their 

goods and services, or about $38 billion,45 in China to the Chinese market. 

The remaining 25 percent of goods and services were sold to other 

countries. These sales included goods and services that were exported 

back to the United States, about 7 percent of the total. This indicates that 

most U.S. companies’ investment is meant to access the Chinese market, 

rather than using China to provide goods and services back to the U.S. 

market.

By 2002, U.S. companies sold more goods and services in China through 

their local affiliates than they exported from the United States. By 2003, 

U.S. affiliates in China sold about $38 billion in goods and services to 

China, while U.S. exports to China that same year were $35 billion. The 

annual growth rate of affiliate sales was 33 percent between 1995 and 2003, 

compared with 11 percent for U.S. exports. Figure 10 shows affiliate sales 

from 1995 to 2003 and exports from 1995 to 2004.

45The affiliate sales data were available through 2003. We adjusted the data for inflation and 

expressed them in 2004 constant dollars.
Page 36 GAO-06-162 China Trade

Figure 10: Growth of Total (Goods and Services) U.S. Affiliate Sales in China and 

U.S. Exports to China, 1995-2004

Notes: 

Data on U.S. affiliate sales are through 2003.

We adjusted all affiliate sales data for inflation and expressed them in 2004 constant dollars.

For goods alone, U.S. affiliate sales in China have also surpassed U.S. 

exports since 2001 (see fig. 11). In 2003, U.S. affiliates sold about $34 billion 

in goods to the Chinese market, while U.S. companies sold about $29 

billion through exports that same year.46 The annual growth rate of affiliate 

sales of goods was 33 percent between 1995 and 2003, compared with 13 

percent for U.S. exports of goods. 

46BEA also collects data from U.S. industries on their affiliates’ total goods sales and total 

services sales. However, BEA does not collect goods data or services data by industry. 

0

5

10

15

20

25

30

35

40

U.S. affiliate sales in China

U.S. goods and services exports to China

Dollars in billions

Year

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.
Page 37 GAO-06-162 China Trade

Figure 11: Growth of U.S. Affiliate Sales of Goods in China and U.S. Goods Exports 

to China, 1995-2004

Notes: 

Data on U.S. affiliate sales are through 2003.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

Unlike goods sales, U.S. companies export more services to China through 

cross-border trade than they sell through affiliates. U.S. affiliates’ services 

sales in China were at levels about two-thirds that of U.S. services exports 

in 2003, that is, $4 billion in affiliate sales versus $6 billion in exports (see 

fig. 12). U.S. affiliates’ services sales in China were growing faster—that is, 

the annual growth rate of affiliate sales of services was 36 percent between 

1995 and 2003, compared with 10 percent for U.S. exports of services. 

However, services are not a major component of sales by U.S. affiliates in 

China and accounted for about 10 percent of all sales by U.S. affiliates 

located in China. 

U.S. affiliate sales of goods in China

U.S. goods exports to China

Dollars in billions

Year

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

0

5

10

15

20

25

30

35
Page 38 GAO-06-162 China Trade

Figure 12: Growth of U.S. Affiliate Sales of Services in China and U.S. Services 

Exports to China, 1995-2004

Notes: Data on U.S. affiliate sales are through 2003.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

The majority of local sales through U.S. affiliates, 67 percent in 2003, were 

in the broad industrial grouping of manufacturing, with over half of these 

sales in the computers and electronic products industry (see app. IV, table 

18).47 The other notable industry was wholesale trade, with at about 20 

percent of all local sales by affiliates. Other smaller industries included 

professional, scientific, and technical services and utilities, with both 

accounting for about 1 percent of total sales (see app. IV, table 17).

47BEA provides data on affiliates’ local sales in China by the industry of the affiliate. It also 

provides data on total sales of both goods and services, but does not report more detail on 

specific types of goods or services. 

U.S. affiliate sales of services in China

U.S. services exports to China

Dollars in billions

Year

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

0

1

2

3

4

5

6

7

8
Page 39 GAO-06-162 China Trade

U.S. Companies Are 

Increasingly Investing in 

China and Selling through 

Affiliates, but Challenges 

Remain

China’s growing domestic market, improving productivity, low labor costs, 

and improving infrastructure has made it an increasingly attractive 

investment venue for U.S. companies.48 The U.S.-China Business Council 

reported in 200449 that China’s implementation of its WTO commitments 

has increased foreign investors’ ability to expand their operations. The 

trend of U.S. affiliate sales surpassing U.S. exports to China is consistent 

with the pattern of U.S. trade and investment worldwide. U.S. multinational 

companies typically sell their goods and services directly through their 

foreign affiliates. However, some experts believe that U.S. investment and 

affiliate sales in China are particularly important. According to a 2004 

Center for Strategic and International Studies report,50 China is an 

attractive venue for foreign investment due to its large domestic 

consumption market, improved productivity, better infrastructure, and 

higher technology standards and quality control. Morgan Stanley reported 

in 200251 that sales of foreign affiliates, rather than exports, are rapidly 

becoming the primary means by which U.S. products are delivered to the 

Chinese; therefore, U.S. export figures do not fully capture the true level of 

U.S. commercial sales in China. The report said that China’s massive 

consumer and labor markets set it apart from the rest of the world, and 

many U.S. firms have no choice but to “be on the ground there.” A Coalition 

of Service Industries official predicted that U.S. affiliate sales of services 

would continue to rise and eventually overtake service exports, especially 

in financial services in which coalition members to do business through 

joint ventures and branches. The Center for Strategic and International 

Studies reported in 2004 that increasing total foreign direct investment in 

China indicates that investment is targeting the domestic market for the 

long term, rather than focusing on China as an export platform. According 

to the International Trade Commission, however, for some countries, such 

48As we previously reported, WTO rules generally do not cover members’ investment 

policies, although China committed to eliminating some investment requirements, such as 

complying fully with the WTO’s Agreement on Trade-Related Investment Measures and 

eliminating policies requiring trade and foreign exchange balancing, local content, and 

export performance. See GAO-03-04.

49The U.S.-China Business Council, Trade with China: Opportunities and Challenges

(submission to the Senate Committee on Finance, June 23, 2005).

50Center for Strategic and International Studies, Bates Gill and Sue Anne Tay, Partners and 

Competitors: Coming to Terms with the U.S.-China Economic Relationship (April 2004).

51Morgan Stanley Equity Research Global, America’s Trade Deficit with China: Why It’s 

Here to Stay (Mar. 22, 2002).
Page 40 GAO-06-162 China Trade

as Asian countries, investing in China as an export platform is still an 

important part of their foreign direct investment.

However, there are some factors that limit or discourage U.S. companies 

from investment in China. For example, the Chinese government is still 

undergoing market-oriented reforms, such as phasing in many of its WTO 

commitments for services; these reforms affect how U.S. companies access 

the market for services in China–-which may explain why sales of services 

through affiliates lagged behind exports of services. According to USTR’s 

December 2004 report, China’s opaque regulatory process and burdensome 

licensing and operating requirements continue to frustrate efforts of U.S. 

services providers in a number of industries. For example, the report cited 

excessive capital requirements for U.S. companies in insurance, banking, 

and telecommunications sectors, among others, that might prevent U.S. 

services companies from operating in China.

Observations This analysis reflects a range of issues affecting U.S.-China trade and 

investment, including broad factors, such as China’s economic 

development and exchange rate regime, and more narrowly focused sectorspecific aspects such as China’s growing importance as a market for U.S. 

goods and services, the rise in integrated production among China’s 

regional trading partners, China’s increasing demand for oil, and China’s 

growing role as an attractive venue for foreign direct investment. Beyond 

this broad overview, further study may be warranted in particular areas, as 

follows:

• The strong, overall growth in U.S. exports over the past decade shows 

that some U.S. companies are successfully selling their goods and 

services to China. This growth is despite the current trade frictions 

between the two countries, which include allegations that China has not 

been meeting all of its WTO commitments and that China is limiting 

market access for U.S. companies. An in-depth analysis of the 

relationship between U.S. export growth in China and China’s WTO 

commitments might provide useful insights about the impact of China’s 

reforms. 

• U.S. services exports to China, although growing, are still relatively 

small and undeveloped, in part because most WTO commitments for 

services either have just recently come into effect or will do so in the 

near future, and in part because of various Chinese restrictions. 

Therefore, it may be best to observe the pattern of U.S. services exports 
Page 41 GAO-06-162 China Trade

when WTO commitments have been phased in and given more time to 

be implemented. 

• Integrated production, as China’s neighbors, including Japan and South 

Korea, use China as an assembly and export platform for their products, 

has implications for the nature of the U.S. trade deficit with China. 

Examining integrated production, particularly for China’s largest import 

and export category machinery, electronics, and high-tech apparatus, 

in which the United States lost export market share in China to other 

countries, may shed light on reasons for the U.S. trade imbalance with 

China. 

• The rise in U.S. affiliate sales relative to U.S. exports also has 

implications for U.S. companies’ ability to access the Chinese market. 

For example, declines in U.S. vehicle exports to China appear to be 

offset by U.S. companies’ shifting production to China and selling 

vehicles directly to the Chinese market through their affiliates. 

Exploring the extent and reasons why affiliate sales have replaced 

exports as a means of accessing the Chinese market may be useful.

• The significance of exchange rates to the U.S.-China trade relationship 

is likely to remain an issue of continuing policy interest. While China’s 

exchange rate has changed only slightly since the Chinese government 

announced a policy modification in July, further changes could, over 

time, provide additional opportunities to study the relationship between 

exchange rates and trade patterns. 

Agency Comments We provided USTR, the Departments of Agriculture and Commerce, and 

the International Trade Commission with a draft of this report for their 

review and comment. All four agencies chose to provide technical 

comments from their staff. Their comments focused on descriptions of 

data sources, methodologies for computing data, and explanations of 

trends in the data. We modified the report in response to their suggestions. 

We will send copies of this report to the appropriate congressional 

committees, the U.S. Trade Representative, the Departments of Agriculture 

and Commerce, and the International Trade Commission. We also will 

make copies available to others upon request. In addition, the report will be 

available at no charge on the GAO Web site at http://www.gao.gov. 
Page 42 GAO-06-162 China Trade

If you or your staff has any questions concerning this report, please contact 

me at (202) 512-2717 or at yagerl@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. A GAO contact and staff acknowledgments are listed in 

appendix V.

Loren Yager

Director, International Affairs and Trade
Page 43 GAO-06-162 China Trade

Appendix I

Objectives, Scope, and Methodologies AAppenednxidexiIs

As part of a long-term body of work that the Chairman and the Ranking 

Minority Member of the Senate Committee on Finance as well as the 

Chairman and the Ranking Minority Member of the House Committee on 

Ways and Means requested, we (1) analyzed U.S. goods exports to China 

and how they have changed over time, (2) analyzed U.S. services exports to 

China and how they have changed over time, (3) assessed how U.S. exports 

to China have fared against other major trading partners’ exports to China, 

and (4) analyzed U.S. investment and affiliate sales in China. 

In order to examine U.S. goods exports to China, we collected annual U.S. 

export statistics from 1995 to 2004 at various levels of detail from the 

Department of Commerce, U.S. Census Bureau. We used U.S. Bureau of 

Labor Statistics export price deflators to deflate the U.S. trade data so that 

all of the values reported are in 2004 constant dollars. We did not deflate 

the foreign direct investment data since we report U.S. investment abroad 

on an historical cost basis, which reflects the prices of earlier periods in 

which the investment was made and represents the accumulated stock of 

these investments. Although Commerce’s U.S. Bureau of Economic 

Analysis (BEA) calculates investments at current prices for aggregate 

investment (which could then be deflated), it does not do so on a bilateral 

basis. Therefore, we do not have an appropriate way to adjust these values 

for any potential effects of inflation. 

We used the U.S. harmonized tariff schedule (HTS) chapter level deflators 

when available; otherwise, we used the corresponding section deflators. 

For the few cases where section deflators were missing as well, we used 

the general export price deflator. To facilitate a broad analysis of U.S. 

exports to China, we grouped imports and exports into higher-level 

categories of goods on the basis of the HTS product codes and our 

discussions with tariff experts. We took the 22 section headings of the HTS 

and grouped them into 10 broader categories. Table 7 shows these 

groupings in detail. We studied the composition of exports by grouping 

products into 10 categories. We compared the annual growth rate of U.S. 

exports to China with U.S. exports to the world from 1995 to 2004 and also 

from 2001 to 2004 at the overall level and the products level. We identified 

products with the highest growth and decline in terms of both value and 

percentage. We (1) analyzed the importance of China as an export market 

for the United States by looking at the share of exports going to China at 

various HTS levels and (2) identified products for which exports to China 

accounted for a significant share. We interviewed a range of government 

and industry experts to obtain contextual information on selected export 

products we identified in our data analysis. Throughout this report, we 
Appendix I

Objectives, Scope, and Methodologies

Page 44 GAO-06-162 China Trade

relied on secondary sources and did not independently review Chinese law 

and regulations to determine their effect on sales and investment.

Table 7: Concordance between 10 GAO Categories and the U.S. Harmonized Tariff Schedule Section Headings

Sources: GAO and the international harmonized system nomenclature (World Customs Organization).

To analyze U.S. services exports to China, we collected annual U.S. export 

statistics from 1995 to 2004 from BEA. We used BEA price indices for major 

service categories from the National Income and Product Accounts to 

convert the trade data so that all values reported are, unless noted 

otherwise, in 2004 constant dollars. We identified the importance of China 

as a U.S. services export destination by looking at China’s overall share of 

U.S. services exports. We calculated the growth rates for services 

categories and subcategories using a log function, so that we could 

examine the categories with the highest growth. In some cases, when BEA 

GAO category HTS section heading

1. Animal and plant products 1. Live animals, animal products

2. Vegetable products

3. Animal or vegetable fats and oils, edible fats, waxes

2. Prepared foods, beverages, spirits, and tobacco 4. Prepared foodstuffs, beverages, spirits, and vinegar; tobacco

3. Chemicals, plastics, and minerals 5. Mineral products

6. Products of chemical or allied industries

7. Plastics and articles thereof, rubber

4. Wood and paper products 9. Wood and articles of wood

10. Pulp of wood, paper, and paperboard

5. Textiles, apparel, leather, and footwear 8. Leather, travel goods, handbags

11. Textiles and textile articles (apparel)

12. Footwear, headgear, umbrellas, etc.

6. Glassware, precious metals and stones, and jewelry 13. Articles of stone, plaster, ceramics, glass, and glassware

14. Pearls, precious or semiprecious stones, precious metals, jewelry, coin

7. Base metals and articles of base metals 15. Base metals and articles of base metals (except tools and implements)

8. Machinery, electronics, and high-tech apparatus 15. Base metals and articles of base metals (tools and implements)

16. Machinery and mechanical appliances, electrical equipment, sound 

recorders, televisions

18. Optical, photographic, cinematographic, measuring, and other apparatus 

(except clocks and watches, musical instruments)

9. Autos and other vehicles and parts 17. Vehicles, aircraft, vessels, and associated transport equipment

10. Miscellaneous manufacturing and special provision 

products

18. Optical, photographic, cinematographic, measuring, and other apparatus 

(clocks and watches, musical instruments) 

19. Arms and ammunition

20. Miscellaneous manufactured articles

21. Works of art, collectors’ pieces, antiques

22. Special classification provisions
Appendix I

Objectives, Scope, and Methodologies

Page 45 GAO-06-162 China Trade

did not publish values for some categories in some years, we estimated the 

missing values and based the growth rate on those estimations. We also 

interviewed several government and industry experts to obtain contextual 

information about services trade with China.

To assess how U.S. exports to China fared against other major trading 

partners’ exports to China, we collected official Chinese trade statistics 

from Global Trade Information Services, a licensed contractor with the 

Chinese government. We reviewed these data, including comparing them 

with comparable United States, European Union (EU), and Japanese trade 

statistics. These data differ from the U.S. statistics, particularly on the 

Chinese export side, given that a portion of China’s trade passes through 

Hong Kong before going to its ultimate destination. However, after 

reviewing the academic literature on this discrepancy and general reviews 

of China’s statistics, we found that the Chinese import statistics (which we 

use in this report) should generally record the country of origin of its 

imports accurately, despite whether products first transit through Hong 

Kong. On the basis of our review of these statistics and the literature, we 

found that these data were sufficiently reliable for comparing the relative 

U.S. share of world exports to China over time to other major trading 

partners, such as the EU and Japan. We analyzed the U.S. share of world 

exports to China from 1995 to 2004 at a broad GAO category level (see table 

7) as well as at a more detailed subcategory level. We compared the trends 

over two, 5-year periods (as discussed in this report). In addition, we also 

compared the trends over 3-year periods to confirm that the results still 

generally held. We calculated the average share across these time periods 

by taking the average of the share in each of the years (e.g., the average of 

the share for 1995, 1996, 1997, 1998, and 1999 in order to get the average 

share in 1995 to 1999). However, we also calculated the weighted average 

share across these time periods (using the value of trade as weights) in 

order to confirm that our results still generally held. When we report the 

value of Chinese trade flows (as opposed to the share of China’s trade) 

using Chinese trade statistics, it is in nominal dollars. We were not able to 

identify an appropriate trade deflator for Chinese statistics in order to 

remove the potential effect of inflation or deflation on the values. Finally, 

we also interviewed industry experts from the Departments of Agriculture 

and Commerce, and the International Trade Commission, and reviewed 

government and academic reports to obtain contextual information about 

the trends in U.S. share of world exports to China.

To study growth in affiliate sales and foreign direct investment, we 

collected annual U.S. affiliate sales statistics from 1995 to 2003 and 
Appendix I

Objectives, Scope, and Methodologies

Page 46 GAO-06-162 China Trade

investment statistics from 1995 to 2004 from BEA. We identified China’s 

importance as a foreign direct investment destination by looking at China’s 

overall share of U.S. foreign direct investment, and examined the United 

States’s importance as a foreign direct investor in China by looking at the 

overall share of U.S. foreign direct investment in China compared with 

other countries. We calculated the growth rates for investment categories 

and subcategories using a log function, so that we could examine which 

categories had the highest growth and decline both in terms of value and 

percentage. BEA reports data on foreign direct investment on an historical 

cost basis. We evaluated the growth in affiliate sales of goods and services 

and compared these values to the growth in cross-border trade in goods 

and services. We calculated the growth rates for affiliate sales categories 

and subcategories using a log function. In some cases, when BEA did not 

publish values for some categories in some years, we estimated the missing 

values and based the growth rate on those estimations. In one case, for 

foreign direct investment in the finance and insurance category, we had to 

use an average annual growth rate instead of a log function because BEA 

reported the value of sales as a negative number. We used Chinese 

Consumer Price Index data to deflate the affiliate sales to 2004 constant 

dollars. We also interviewed several government and industry experts to 

obtain contextual information about U.S. investment in and affiliate sales 

to China. 

For each of the data sets that we used, we examined the data and found 

them sufficiently reliable for the purposes of our report. In addition, 

although Chinese data on U.S. exports have limitations and differ from U.S. 

statistics, we found them to be sufficiently reliable to present individual 

countries’ relative shares of China’s trade. 

We performed our work from April 2005 to December 2005 in accordance 

with generally accepted government auditing standards.
Page 47 GAO-06-162 China Trade

Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China ApendxiI

U.S. exports of goods to China have grown rapidly over the past decade, 

while the U.S. share of world exports to China has fallen during the same 

period. These trends are evident at a broad category level and at a more 

detailed subcategory level. This appendix provides detailed information on 

these changes as well as selected information on particular products. 

Specifically, the tables that follow provide additional information on 

subcategories of products. Table 8 lists subcategories whose exports to 

China accounted for more than 10 percent of total U.S. exports in that 

category in 2004; table 9 lists subcategories whose exports to China 

accounted for less than 1 percent of total U.S. exports in 2004; table 10 list 

subcategories with the largest increases in export value over the decade; 

table 11 lists subcategories with the largest declines in export value; table 

12 lists subcategories with the largest declines the U.S. share of world 

exports to China; and table 13 lists subcategories with the largest increases 

in the U.S. share of world exports to China. Finally, table 14 provides 

complete data on U.S. exports to China and the U.S. share of world exports 

to China for the 10 broad categories of goods and their 99 subcategories. 

China is a major market for some U.S. goods exports. Table 8 lists the 

products for which exports to China accounted for more than 10 percent of 

U.S. exports in that category in 2004. In particular, there were four products 

for which more than one-quarter of total U.S. exports were destined for 

China in 2004. 

Table 8: Goods Subcategories for Which U.S. Goods Exports to China Accounted for More Than 10 Percent of Total U.S. Goods 

Exports in 2004

Dollars in millions

Goods subcategory HTS chapter

Exports to China 

(2004)

Total exports 

(2004)

 China’s share of total 

U.S. exports

Vegetable plaiting materials & products 

nesoi 14 $10 $35 28.90%

Oil seeds etc.; misc grain, seed, fruit, plant 

etc 12 2,370 8,500 27.88

Zinc and articles thereof 79 37 142 26.27

Silk, including yarns and woven fabric 50 6 25 25.08

Cotton, including yarn and woven fabric 

thereof 52 1,420 6,280 22.61

Raw hides and skins (no fur skins) and 

leather 41 579 2,730 21.21
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 48 GAO-06-162 China Trade

Source: GAO analysis of Department of Commerce, U.S. Census Bureau data.

Notes: 

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

China is an insignificant market for some other U.S. goods exports. Table 9 

lists products for which less than 1 percent of U.S. exports went to China in 

2004. Some of these products are among major U.S. exports, such as 

vehicles and pharmaceutical products, which had an overall export of $67 

billion and almost $19 billion in 2004, respectively. 

Table 9: Goods Subcategories for Which U.S. Goods Exports to China Accounted for Less Than 1 percent of Total U.S. Goods 

Exports in 2004

Fur skins and artificial fur; manufactures 

thereof 43 41 209 19.47

Copper and articles thereof 74 616 3,270 18.84

Wood pulp etc; recovered (waste & scrap) 

paper and paper board 47 730 4,500 16.22

Iron and steel 72 1,080 8,520 12.68

Manmade staple fibers, yarns & woven 

fabrics 55 209 1,680 12.44

Fertilizers 31 311 $2,610 11.92

(Continued From Previous Page)

Dollars in millions

Goods subcategory HTS chapter

Exports to China 

(2004)

Total exports 

(2004)

 China’s share of total 

U.S. exports

Dollars in millions

Goods subcategory HTS chapter 

Exports to China 

(2004)

Total exports 

(2004) 

China’s share of total 

U.S. exports

Clocks and watches and parts thereof 91 $2 $271 0.91%

Headgear and parts thereof 65 1 102 0.90

Vehicles, except railway or tramway, and parts etc 87 602 67,000 0.90

Nat etc pearls, precious etc. stones, pr met etc; 

coin 71 79 9,970 0.79

Explosives; pyrotechnics; matches; pyro alloys etc 36 4 484 0.79

Textile art nesoi; needlecraft sets; worn text art 63 7 905 0.76

Prep cereal, flour, starch or milk; bakers wares 19 12 1,730 0.71

Milling products; malt; starch; inulin; wheat gluten 11 4 667 0.67

Mfr of straw, esparto etc.; basket ware & 

wickerwork 46 0 21 0.60
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 49 GAO-06-162 China Trade

Source: GAO analysis of Department of Commerce, U.S. Census Bureau trade statistics.

Notes: 

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

U.S. goods exports to China for the majority, 88 out of 99 goods 

subcategories, increased in value over the past decade. High-value 

subcategories, such as electric machinery, and those experiencing the 

highest growth rates, such as oilseeds, were the main contributors to the 

overall export value increase. As shown in table 10, the top 5 subcategories 

accounted for close to 60 percent of the total export increase for the 

period. 

Live animals 1 3 506 0.55

Apparel articles and accessories, not knit etc. 62 8 1,590 0.52

Edible vegetables & certain roots & tubers 7 10 1,910 0.50

Pharmaceutical products 30 94 18,900 0.50

Carpets and other textile floor coverings 57 4 767 0.48

Works of art, collectors' pieces and antiques 97 6 1,320 0.46

Live trees, plants, bulbs etc.; cut flowers etc. 6 1 282 0.46

Beverages, spirits and vinegar 22 9 2,180 0.42

Apparel articles and accessories, knit or crochet 61 8 2,430 0.34

Coffee, tea, mate & spices 9 1 269 0.32

Knitted or crocheted fabrics 60 5 1,630 0.29

Arms and ammunition; parts and accessories 

thereof 93 5 2,240 0.24

(Continued From Previous Page)

Dollars in millions

Goods subcategory HTS chapter 

Exports to China 

(2004)

Total exports 

(2004) 

China’s share of total 

U.S. exports
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 50 GAO-06-162 China Trade

Table 10: Goods Subcategories with the Highest Value Increase in U.S. Exports to China (Average 1995-1999 Versus Average 

2000-2004)

Source: GAO analysis of Department of Commerce, U.S. Census Bureau trade statistics.

Notes: 

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

a

Values in column (C) are derived by subtracting columns (A) from (B).

b

Percentages in column (D) are derived by dividing each value in colunm (C) by the summation of all 

items in column (C). 

Dollars in millions

 Average exports

Goods subcategory

HTS 

chapter

1995-1999 

(A)

2000-2004 

(B) 

Change in 5-year 

periods

(C)a

Share of change in 

5-year periods

 (D)b

Electric machinery etc; sound equip; 

television equipment; pts 85 $1,249 $3,370 $2,121 17.53%

Nuclear reactors, boilers, machinery 

etc.; parts 84 2,290 4,080 1,790 14.80

Oil seeds etc.; misc. grain, seed, fruit, 

plant etc 12 385 2,030 1,645 13.60

Iron and steel 72 149 950 802 6.63

Optic, photo etc, medic or surgical 

instruments etc 90 569 1,308 739 6.11

Plastics and articles thereof 39 441 1,169 727 6.01

Organic chemicals 29 303 920 617 5.10

Copper and articles thereof 74 111 500 389 3.21

Raw hides and skins (no fur skins) 

and leather 41 147 451 304 2.51

Wood pulp etc; recovered (waste & 

scrap) paper and paper board 47 203 494 291 2.41

Wood and articles of wood; wood 

charcoal 44 41 229 188 1.55

Miscellaneous chemical products 38 119 297 178 1.47

Aluminum and articles thereof 76 181 357 176 1.46

Cotton, including yarn and woven 

fabric thereof 52 330 497 167 1.38

Vehicles, except railway or tramway, 

and parts etc 87 202 366 164 1.36

All other products 4,019 5,819 1,799 15
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 51 GAO-06-162 China Trade

Far fewer, 9 of 99 of the goods subcategories, experienced declines in 

export value in the past decade.1

 Fertilizer experienced the highest decline, 

with the annual average dropping $560 million for the second 5 years from 

the previous 5 years, accounting for more than half of the total export 

decline. 

Table 11: Products with the Highest Value Decrease in Exports to China (Average 1995-1999 Versus Average 2000-2004)

Source: GAO analysis of Department of Commerce, U.S. Census Bureau trade statistics.

Notes:

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

a

Values in column (C) are derived by subtracting columns (A) from (B).

b

Percentages in column (D) are derived by dividing each value in column (C) by the summation of all 

items in column (C). 

U.S. share of world goods exports to China declined overall from 1995 to 

2004. Table 12 shows the top 20 products that experienced declines in 

share between 1995 to 1999 and 2000 to 2004, as well as information on the 

1

The United States did not export goods to China in the remaining 2 (of 99) subcategories.

Dollars in millions

Average exports

Goods subcategory HTS chapter 

1995-1999

(A)

2000-2004 

(B)

Change in 5-year 

periods

(C)a

Share of change in 

5-year periods

(D)b

Fertilizers 31 $1,107 $547 $(560) 53.25%

Cereals 10 311 126 (185) 17.59

Animal or vegetable fats, oils etc. & waxes 15 217 42 (176) 16.73

Mineral fuel, oil etc.; bitumin substitute; 

mineral wax 27 197 142 (55) 5.24

Toys, games & sport equipment; parts & 

accessories 95 76 29 (46) 4.40

Food industry residues & waste; prep 

animal feed 23 109 86 (23) 2.22

Carpets and other textile floor coverings 57 7 4 (3) 0.26

Wool & animal hair, including yarn & 

woven fabric 51 7 5 (2) 0.23

Textile art; needlecraft sets; worn text art 63 6 5 (1) 0.09
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 52 GAO-06-162 China Trade

overall value of U.S. exports to China in 2004. Carpets and other textile 

floor coverings experienced the largest decline of any subcategory, falling 

from 42 percent of the world exports to China between 1995 and 1999, to 

only 13 percent between 2000 and 2004, on average. U.S. exports to China 

of carpets and other textile floor coverings in 2004 were $4 million. 

However, the table shows that a range of products experienced declines, 

including tobacco, toys, some agricultural products, and fertilizers. 

Table 12: Top 20 Declines in U.S. Share of World Exports to China, 1995-2004

Source: GAO analysis of Department of Commerce, U.S. Census Bureau trade statistics and official Chinese trade statistics.

Notes: 

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted all data for inflation and expressed them in 2004 constant dollars.

Dollars in millions

U.S. share of world exports to China

Subcategory

HTS 

chapter

Percentage point 

change

(A) minus (B)a

Average (1995-

1999)

(A)

Average (2000-

2004) 

(B)

Export 

value 

(2004) 

Carpets and other textile floor coverings 57 (29)% 42% 13% $4 

Tobacco 24 (18) 22 4 27 

Misc. grain, seed, fruit 12 (12) 52 40 2,370 

Toys and sports equipment 95 (12) 20 8 52 

Vegetables 7 (11) 19 8 10 

Fats and oils 15 (10) 13 3 35 

Explosives 36 (10) 42 32 4 

Fertilizers 31 (10) 41 31 311 

Dairy, eggs, honey, etc. 4 (9) 19 10 38 

Live animals 1 (8) 26 18 3 

Milling; malt; starch 11 (8) 13 5 4 

Cotton and yarn, fabric 52 (7) 18 11 1,420 

Art and antiques 97 (6) 15 9 6 

Railway;trf sign eq 86 (6) 9 3 47 

Cereals 10 (6) 17 11 496 

Optic,nt 8544;med instruments 90 (6) 23 17 1,980 

Other base metals, etc. 81 (5) 15 10 94 

Fur skin, artificial fur 43 (6) 8 2 41 

Glass and glassware 70 (5) 11 6 126 

Other vegetable 14 (5) 16 11 10 
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 53 GAO-06-162 China Trade

a

The percentage point change is derived by subtracting the value in column (B) from the value in 

column (A).

Although, as previously discussed, 55 of the 99 subcategories of U.S. 

exports to China experienced a decline in the share of world exports to 

China, 42 subcategories experience a rise from the first half of the decade 

(1995 to 1999) to the second half (2000 to 2004).2

 Table 13 shows the top 20 

of these 42 categories that experienced increases in share. Miscellaneous 

edible preparations—which are types of prepared foodstuffs, including 

certain products, such as mayonnaise, mixed seasonings, and certain 

sauces and syrups—experienced the largest increase over the decade, 

growing from a 14 percent share to a 40 percent share of world exports, on 

average. Once again, the subcategories that experienced increases covered 

a wide range of products, including gums and resins, printed books and 

newspapers, and aircraft. However, many of these, as shown in table 13, 

were agricultural products.

Table 13: Top 20 Increases in U.S. Share of World Goods Exports to China, 1995-2004

2

The United States did not export goods to China in the remaining 2 (of 99) subcategories.

Dollars in millions

U.S. share of world exports to china

Subcategory HTS chapter

Percentage point 

change

(B) minus (A)a

Average 

(1995-1999) 

(A)

 Average 

(2000-2004) 

(B)

 Export 

value 

(2004)

Miscellaneous edible preparations 21 26% 14% 40% $178 

Edible preparations of meat, fish, crustaceans etc 16 20 11 31 12 

Lac; gums, resins & other vegetable sap & extract 13 16 16 32 14 

Prep vegetables, fruit, nuts or other plant parts 20 14 31 45 55 

Products of animal origin, nesoi 5 11 26 37 44 

Leather art; saddlery etc; handbags etc; gut art 42 9 2 11 8 

Wadding, felt etc; sp yarn; twine, ropes etc. 56 9 3 12 71 

Edible fruit & nuts; citrus fruit or melon peel 8 8 7 15 71 

Printed books, newspapers etc; manuscripts etc 49 6 7 13 49 

Soap etc; waxes, polish etc; candles; dental preps 34 4 13 17 124 

Aircraft, spacecraft, and parts thereof 88 3 51 54 1,950 

Essential oils etc; perfumery, cosmetic etc preps 33 4 23 27 82 

Mfr of straw, esparto etc.; basket ware & wickerwork 46 4 2 6 0 
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 54 GAO-06-162 China Trade

Source: GAO analysis of Department of Commerce, U.S. Census Bureau trade statistics and official Chinese trade statistics.

Notes:

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted all data for inflation and expressed them in 2004 constant dollars. 

a

The percentage point change is derived by subtracting the value in column (B) from the value in 

column (A).

Finally, table 14 provides information across all 10 broad categories and the 

99 subcategories that comprise them on the average annual growth of U.S. 

exports to China from 1995 to 1999, 2000 to 2004, and over the whole 

decade of 1995 to 2004. The table also shows U.S. exports to China in 2004 

and the average U.S. share of world exports to China in 1995 to 1999, 2000 

to 2004, and over the whole time period. Finally, the table shows the 

difference between U.S. share of exports in 1995 to 1999 and 2000 to 2004.

Footwear 64 3 15 18 31

Cocoa and cocoa preparations 18 3 12 15 8 

Art of stone, plaster, cement, asbestos, mica etc. 68 3 9 12 77 

Ceramic products 69 3 10 13 46 

Sugars and sugar confectionary 17 3 2 5 40 

Coffee, tea, mate & spices 9 3 6 9 1 

Hides and skins 41 3 13 16 579

(Continued From Previous Page)

Dollars in millions

U.S. share of world exports to china

Subcategory HTS chapter

Percentage point 

change

(B) minus (A)a

Average 

(1995-1999) 

(A)

 Average 

(2000-2004) 

(B)

 Export 

value 

(2004)
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 55 GAO-06-162 China Trade

[This page is intentionally left blank.]
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 56 GAO-06-162 China Trade

Table 14: U.S. Goods Exports and U.S. Share of World Goods Exports to China—All 

Categories and Subcategories, 1995-2004

Dollars in millions

Category or subcategory

HTS 

chapter

Average 

annual 

growth 

(1995-2004)

Group 1: Animal and plant products 14%

Live Animals 1 (4)

Meat and Edible Meat Offal 2 7

Fish, Crustaceans, and Aquatic Invertebrates 3 12

Dairy Products; Birds, Eggs; Honey; Edible Animal Products 

NESOI 4 28

Products of Animal Origin NESOI 5 13

Live Trees, Plants, Bulbs, Etc.; Cut Flowers, Etc. 6 15

Edible Vegetables and Certain Roots and Tubers 7 30

Edible Fruit and Nuts; Citrus Fruit or Melon Peel 8 55

Coffee, Tea, Mate and Spices 9 18

Cereals 10 (15)

Milling Products; Malt; Starch; Inulin; Wheat Gluten 11 18

Oil Seeds, Etc.; Misc Grain, Seed, Fruit, Plant, Etc. 12 40

Lac; Gums, Resins, and Other Vegetable Sap and Extract 13 60

Vegetable Plaiting Materials and Products NESOI 14 2

Animal or Vegetable Fats, Oils. Etc. and Waxes 15 (2)

Group 2: Prepared food, beverages, spirits, and tobacco 18%

Edible Preparations of Meat, Fish, Crustaceans, Etc. 16 21

Sugars and Sugar Confectionary 17 34

Cocoa and Cocoa Preparations 18 11

Prepared Cereal, Flour, Starch or Milk; Bakers Wares 19 26

Prepared Vegetables, Fruit, Nuts, or Other Plant Parts 20 44

Miscellaneous Edible Preparations 21 41

Beverages, Spirits, and Vinegar 22 10

Food Industry Residues and Waste; Prepared Animal Feed 23 4

Tobacco and Manufactured Tobacco Substitutes 24 7

Group 3: Chemicals, plastics, and minerals 10%

Salt; Sulfur; Earth and Stone; Lime and Cement Plaster 25 24

Ores, Slag, and Ash 26 3
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 57 GAO-06-162 China Trade

U.S. exports to China U.S. share of world exports to China

Average annual 

growth

(1995-1999)

Average annual 

growth

(2000-2004)

Share of U.S. 

exports to the 

world

Export 

value

(2004)

Average

(1995-1999)

(A)

Average

(2000-2004)

(B)

Percentage point 

change

(B) minus (A)a

(10)% 20% 8% $3,409 24% 25% 1%

(11) (18) 1 3 26 18 (8)

11 3 1 64 65 67 2

4 15 8 249 10 8 (2)

40 20 3 38 19 10 (9)

41 0 8 44 26 37 11

78 (9) 0 1 5 4 (1)

101 0 1 10 19 8 (11)

36 19 1 71 7 15 8

65 (16) 0 1 6 9 3

(49) 73 4 496 17 11 (6)

22 (7) 1 4 13 5 (8)

48 18 28 2,370 52 40 (12)

173 3 4 14 16 32 16

19 (11) 29 10 16 11 (5)

(20) 34 2 35 13 3 (10)

26% 20% 2% $406 13% 16% 3%

(6) 0 1 12 11 31 20

34 16 6 40 2 5 3

10 10 1 8 12 15 3

23 6 1 12 13 12 (1)

49 22 3 55 31 45 14

27 52 5 178 14 40 26

14 27 0 9 7 3 (4)

31 (5) 2 65 14 15 1

33 79 1 27 22 4 (18)

6% 20% 4% $5,760 11% 7% (4)%

30 4 5 90 11 7 (4)

(31) 40 8 144 1 1 0
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 58 GAO-06-162 China Trade

Category or subcategory

HTS 

chapter

Average 

annual 

growth 

(1995-2004)

Mineral Fuel, Oil, Etc.; Bitumin Substances; Mineral Wax 27 5

Inorganic Chemicals; Precious and Rare-Earth Metals and 

Radioactive Compounds 28 25

Organic Chemicals 29 22

Pharmaceutical Products 30 13

Fertilizers 31 (13)

Tanning and Dye Ext, Etc.; Dye, Paint, Putty, Etc.; Inks 32 20

Essential Oils, Etc.; Perfumery, Cosmetic, Etc. Preparations 33 25

Soap, Etc.; Waxes, Polish, Etc; Candles; Dental 

Preparations 34 32

Albuminoidal Substances; Modified Starch; Glue; Enzymes 35 43

Explosives; Pyrotechnics; Matches; Pyro Alloys, Etc. 36 8

Photographic or Cinematographic Goods 37 46

Miscellaneous Chemical Products 38 19

Plastics and Plastic Articles 39 20

Rubber and Rubber Articles 40 37

Group 4: Wood and paper products 17%

Wood and Wood Articles; Wood Charcoal 44 37

Cork and Cork Articles 45 1

Articles of Straw, Esparto, Etc.; basket ware and wicker 

ware 46 14

Wood Pulp, Etc.; Recovered (Waste and Scrap) Paper and 

Paperboard 47 18

Paper and Paperboard and Articles (Including Paper Pulp 

Articles) 48 12

Printed Books, Newspapers, Etc.; Manuscripts, Etc. 49 11

Group 5: Textiles, apparel, leather, and footwear 11%

Raw Hides and Skins (No Fur skins) and Leather 41 23

Leather Articles; Saddlery, Etc.; Handbags. Etc,; Gut 

Articles 42 13

Fur skins and Artificial Fur and Articles 43 28

Silk, Including Yarns and Woven Fabric 50 52

Wool and Animal Hair, Including Yarn and Woven Fabric 51 (7)

Cotton, Including Yarn and Woven Fabric 52 4

Vegetable Textile Fibers NESOI; Vegetable Fibers and 

Paper Yarns and Woven Fabric 53 29

(Continued From Previous Page)
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 59 GAO-06-162 China Trade

U.S. exports to China U.S. share of world exports to China

Average annual 

growth 

(1995-1999)

Average annual 

growth 

(2000-2004)

Share of U.S. 

exports to the 

world

Export 

value 

(2004)

Average 

(1995-1999) 

(A)

Average 

(2000-2004) 

(B)

Percentage point 

change

(B) minus (A)a

45 26 1 222 2 1 (1)

10 37 5 343 12 10 (2)

9 33 5 1,530 11 9 (2)

7 22 0 94 9 9 0

(1) (15) 12 311 41 31 (10)

15 11 3 130 8 8 0

12 26 2 82 23 27 4

24 38 4 124 13 17 4

46 29 6 88 13 14 1

20 (7) 1 4 42 32 (10)

56 31 6 160 20 21 1

14 18 4 452 21 22 1

13 23 5 1,770 9 8 (1)

11 36 3 217 4 6 2

20% 22% 6% $1,641 15% 14% (1)%

23 39 7 374 6 6 0

17 (14) 1 0 3 1 (2)

111 29 1 0 2 6 4

8 32 16 730 26 24 (2)

28 9 4 487 18 13 (5)

43 8 1 49 7 13 6

(20)% 45% 10% $2,553 7% 7% 0%

13 18 21 579 13 16 3

13 (2) 2 8 2 11 9

(2) 66 19 41 8 2 (6)

(13) 59 25 6 1 1 0

(46) 36 7 7 1 0 (1)

(55) 153 23 1,420 18 11 (7)

(15) 66 9 2 1 0 (1)
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 60 GAO-06-162 China Trade

Category or subcategory

HTS 

chapter

Average 

annual 

growth 

(1995-2004)

Manmade Filaments, Including Yarns and Woven Fabrics 54 25

Manmade Staple Fibers, Including Yarns and Woven 

Fabrics 55 5

Wadding, Felt, Etc.; Special Yarn; Twine, Ropes, Etc. 56 41

Carpets and Other Textile Floor Coverings 57 (8)

Special Woven Fabrics; Tufted Fabric; Lace; Tapestries, Etc. 58 44

Impregnated, Etc. Textile Fabrics; Textile Articles For 

Industry 59 35

Knitted or Crocheted Fabrics 60 12

Apparel Articles and Accessories, Knit or Crochet 61 4

Apparel Articles and Accessories, Not Knit, Etc. 62 21

Textile Art NESOI; Needlecraft Sets; Worn Textile Articles 63 (1)

Footwear, Gaiters, Etc. and Parts 64 17

Headgear and Parts 65 23

Umbrellas, Walking-Sticks, Riding-Crops, Etc, Parts 66 23

Prepared Feathers, Down, Etc.; Artificial Flowers; H Hair 

Articles 67 30

Group 6: Glassware, precious metals and stones, jewelry 15%

Articles of Stone, Plaster, Cement, Asbestos, Mica, Etc. 68 18

Ceramic Products 69 13

Glass and Glassware 70 13

Natural and Other Pearls, Precious and Other Stones, 

Precious Metals, Etc.; Coins 71 19

Group 7: Base metals and articles of base metals 23%

Iron and Steel 72 37

Articles of Iron or Steel 73 3

Copper and Copper Articles 74 27

Nickel and Nickel Articles 75 29

Aluminum and Aluminum Articles 76 13

Lead and Lead Articles 78 48

Zinc and Zinc Articles 79 62

Tin and Tin Articles 80 11

Base Metals NESOI; Ceramic Metals; Articles Thereof 81 21

Miscellaneous Articles of Base Metals 83 9

(Continued From Previous Page)
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 61 GAO-06-162 China Trade

U.S. exports to China U.S. share of world exports to China

Average annual 

growth 

(1995-1999)

Average annual 

growth 

(2000-2004)

Share of U.S. 

exports to the 

world

Export 

value 

(2004)

Average 

(1995-1999) 

(A)

Average 

(2000-2004) 

(B)

Percentage point 

change

(B) minus (A)a

19 20 3 52 2 2 0

(20) 19 12 209 4 6 2

20 65 5 71 3 12 9

13 (11) 0 4 42 13 (29)

20 52 4 31 2 2 0

32 41 4 60 2 4 2

46 (17) 0 5 1 1 0

(19) 56 0 8 1 0 (1)

8 1 1 8 1 1 0

(6) 15 1 7 10 11 1

57 (9) 7 31 15 18 3

28 45 1 1 1 2 1

101 23 2 0 0 0 0

24 7 10 3 5 3 (2)

14% 8% 2% $329 10% 7% (3)

(1) 19 5 77 9 12 3

(3) 1 5 46 10 13 3

13 17 3 126 11 6 (5)

32 (2) 1 79 10 7 (3)

2% 23% 8% $2,615 6% 5% (1)%

9 30 13 1,080 2 3 1

(11) 22 3 225 11 9 (2)

(2) 21 19 616 10 8 (2)

32 28 7 50 6 4 (2)

7 9 8 463 13 9 (4)

42 3 3 3 3 4 1

33 105 26 37 6 5 (1)

(10) 0 5 4 7 3 (4)

3 49 7 94 15 10 (5)

5 18 1 43 6 7 1
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 62 GAO-06-162 China Trade

Category or subcategory

HTS 

chapter

Average 

annual 

growth 

(1995-2004)

Group 8: Machinery, electronics, and high-tech apparatus 15%

Tools, Cutlery Etc. of Base Metal; Parts 82 15

Nuclear Reactors, Boilers, Machinery, Etc.; Parts 84 11

Electric Machinery, Etc.; Sound and TV Equipment; Parts 85 20

Optic, Photo, Etc. Medical or Surgical Instruments, Etc. 90 17

Group 9: Aircraft, autos, and other transportation 5%

Railway or Tramway Stock, Etc.; Traffic Signal Equipment 86 15

Vehicles, Except Railway or Tramway, and Parts, Etc. 87 13

Aircraft and Spacecraft; Parts 88 3

Ships, Boats, and Floating Structures 89 16

Group 10: Miscellaneous manufacturing 4%

Clocks and Watches; Parts 91 15

Musical Instruments; Parts and Accessories 92 28

Arms and Ammunition; Parts and Accessories 93 (13)

Furniture; Bedding, Etc.; Lamps NESOI, Etc.; Prefabricated 

Bedding 94 3

Toys, Games and Sport Equipment; Parts and Accessories 95 (13)

Miscellaneous Manufactured Articles 96 16

Works of Art, Collectors’ Pieces, and Antiques 97 13

Special Classification Provisions, NESOI 98 9

(Continued From Previous Page)
Appendix II

U.S. Goods Exports and U.S. Share of World 

Goods Exports to China

Page 63 GAO-06-162 China Trade

Source: GAO analysis of Department of Commerce, U.S. Census Bureau, and official Chinese data.

Notes:

HTS is the U.S. Harmonized Tariff Schedule.

We adjusted these data for inflation and expressed them in 2004 constant dollars.

HTS chapter 77 is reserved for future use. Chapter 99 consists of temporary legislation, temporary 

modifications, proclaimed pursuant to trade agreements legislation, and additional import restrictions 

proclaimed pursuant to section 22 of the Agricultural Adjustment Act, as amended.

a

The percentage point change is derived by subtracting the value in column (B) from the value in 

column (A).

U.S. exports to China U.S. share of world exports to China

Average annual 

growth 

(1995-1999)

Average annual 

growth 

(2000-2004)

Share of U.S. 

exports to the 

world

Export 

value 

(2004)

Average 

(1995-1999) 

(A)

Average 

(2000-2004) 

(B)

Percentage point 

change

(B) minus (A)a

9% 19% 5% $12,761 13% 10% (3)%

3 5 2 61 13 13 0

5 15 5 5,770 14 12 (2)

13 22 5 4,950 10 8 (2)

12 24 4 1,980 23 17 (6)

20% 6% 2% $2,627 28% 21% (7)%

0 58 3 47 9 3 (6)

0 35 1 602 9 5 (4)

21 1 5 1,950 51 54 3

(32) 94 2 28 2 4 2

0% 10% 1% $510 8% 7% (1)%

15 0 1 2 1 0 (1)

3 40 1 6 1 2 1

(52) 5 0 5 10 6 (4)

(7) (1) 1 77 15 12 (3)

(22) 17 2 52 20 8 (12)

3 18 1 14 2 3 1

22 2 0 6 15 9 (6)

11 12 1 346 9 10 1
Page 64 GAO-06-162 China Trade

Appendix III

Services Trade Categories and Their 

Definitions ApendxiI

Source: Department of Commerce, Bureau of Economic Analysis.

Category Definition

Travel Goods and services purchased by U.S. persons traveling abroad and by foreign travelers in the 

United States.

Passenger Fares Fares received by U.S. air carriers from foreign residents for travel between the United States and 

foreign countries and between two foreign points.

Other Transportation U.S. international transactions arising from the transportation of goods by ocean, air, land, 

pipeline, and inland waterway carriers to and from the United States and between two foreign 

points.

Royalties and License Fees Transactions with nonresidents that involve patented and unpatented techniques, processes, and 

formulas, as well as trademarks, copyrights, franchises, broadcast rights, and other intangible 

rights, including rights to distribute, use, and reproduce general-use computer software. 

Other Private Services

Education Expenditures for tuition and living expenses by foreign students enrolled in U.S. colleges and 

universities and by U.S. students for study abroad.

Financial services Funds management, credit card services, fees and commissions on transactions in securities, 

implicit fees paid and received on bond trading, fees on credit-related activities, and other 

financial services.

Insurance services Investment income of insurance companies on funds that are treated as belonging to 

policyholders, and auxiliary services such as agents’ commissions, actuarial services, insurance 

brokering, and agency services. 

Telecommunication Receipts and payments between U.S. and foreign communications companies for the 

transmission of messages between the United States and other countries.

Other services Expenditures (except employee compensation) by foreign governments in the United States for 

services such as maintaining their embassies and consulates, as well as expenditures by 

international organizations headquartered in the United States and of foreign residents employed 

temporarily in the United States. 

Business, Professional, and Technical Services

Computer and information Computer and data processing services and database and other information services.

Management and consulting Management services, except management of health care facilities, and consulting services, 

except consulting engineering services related to actual or proposed construction projects and 

computer consulting, and public relations services, except those that are an integral part of an 

advertising campaign.

Research and development Commercial and noncommercial research, product development services, and testing services. 

Operational leasing Rentals for computer and data processing equipment, and transportation equipment (such as 

ships, aircraft, railway cars, etc.) without crew or operators.

Other business, professional, and 

technical services

Examples include accounting, auditing, and bookkeeping, advertising, construction, and legal 

services.
Page 65 GAO-06-162 China Trade

Appendix IV

U.S. Foreign Direct Investment and U.S. 

Affiliate Sales in China ApendxiIV

U.S. Foreign Direct 

Investment in China

From 1995 to 2004, U.S. foreign direct investment in all industries in China 

grew at about a 21 percent average annual rate. BEA classifies U.S. foreign 

investment into broad industry groups, such as wholesale trade, 

manufacturing, mining, finance, and utilities. Growth among industries 

varied, as shown in tables 15 and 16. 

Table 15: Industry Group U.S. Foreign Direct Investment to China by Annual Growth Rate (1995-2004) and Value Foreign Direct 

Investment for 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

Note: We did not adjust these data for inflation.

a

Foreign direct investment data for information, mining, and utilities are not available from 1995 to 

1998. Therefore, we could not calculate the growth rate for the first 5 years. For information and 

mining, the overall growth rates were calculated from 1999 to 2004. For utilities, the overall growth rate 

was calculated from 1999 to 2003.

b

This figure is from 2003. BEA did not publish this figure for 2004.

c

The growth rates for finance and insurance were calculated in a different way from the other 

categories because of negative values in some years for insurance sales. See appendix I for more 

information.

Dollars in millions

Annual growth rate (percent)

Industry group receiving investment

Overal

(1995-2004)

First 5 years

(1995-1999)

Second 5 years 

(2000-2004)

Foreign direct 

investment 

(2004)

Information 39% NAa 36% $368

Other industries 34 74% 3 1,375b

Wholesale trade 32 27 49 1,825

Depository institutions 26 (8) 69 534

Manufacturing 23 53 2 8,222

Professional, scientific, and technical services 17 52 20 688

Mining 10 NAa 1 1,740

Finance (except depository institutions) and 

insurancec 5 62 (53) (2)

Utilities (2) NAa (0.2) 565b

Total 21% 42% 7% $15,430
Appendix IV

U.S. Foreign Direct Investment and U.S. 

Affiliate Sales in China

Page 66 GAO-06-162 China Trade

Table 16: Manufacturing Industry Group U.S. Foreign Direct Investment to China by the Annual Growth Rate (1995-2004) and 

Value Foreign Direct Investment 2004

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

Note: We did not adjust these data for inflation.

a

Foreign direct investment data for computer and electronic products are not available from 1995 to 

1998. Therefore, we cannot calculate the growth rate for the first 5 years. The overall growth rate was 

calculated from 1999 to 2004.

U.S. Affiliate Sales in 

China

In 2003, U.S. affiliates in China sold about $38 billion in goods and services 

to the Chinese market. BEA collects data on U.S. affiliate sales under 

generally the same industry groups as foreign direct investment, as shown 

in tables 17 and 18. These industry groups may include operations that 

produce goods and services. For example, although U.S. affiliates in the 

manufacturing industry generally produce goods, they may also produce 

some services.

Dollars in million

Annual growth rate (percent)

Manufacturing industry group

Overall 

(1995-2004)

First 5 years 

(1995-1999)

 Second 5 years 

(2000-2004)

Foreign direct 

investment 

(2004)

Transportation equipment 67% 241% 31% $1,832

Chemicals 28 44 11 1,643

Food 22 35 21 593

Primary and fabricated metals 11 72 (2) 149

Machinery 9 49 20 455

Electrical equipment, appliances and components (8) (13) 2 493

Computers and electronic products (16) NAa (25) 1,341

Total 23% 53% 2% $8,222
Appendix IV

U.S. Foreign Direct Investment and U.S. 

Affiliate Sales in China

Page 67 GAO-06-162 China Trade

Table 17: Affiliate industry Group Sales in China by Annual Growth Rate (1995-2003) and Sales Value in 2003

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data.

Note: We adjusted these data for inflation and expressed them in 2004 constant dollars.

a

Affiliate sales data for information and utilities are not available from 1995 to 1998. Therefore, we 

could not calculate the growth rate for the first 5 years for these categories. The overall growth rates for 

these categories were calculated from 1999 to 2003. 

b

Affiliate sales data for other industries were only available for 1996, 2000, and 2001. We estimated 

figures for 1997, 1998, and 1999. We calculated the growth rate for the first period from 1996 to 1999, 

and for the last period from 2000 to 2001. The overall growth rate for this category was calculated from 

1996 to 2001.

c

Affiliate sales data for finance and insurance are not available for 2002 and 2003. Therefore, we 

calculated the growth rate for the last period from 2000 to 2001. The overall growth rate for this 

category was calculated from 1995 to 2001.

d

Affiliate sales data for mining are not available from 1995 to 1999. Therefore, we could only calculate 

the growth rate for 2000 to 2003.

Dollars in millions

Annual growth rate (percent)

Affiliate industry group

Overall 

(1995-2003)

First 5 years

(1995-1999)

Last 4 years

(2000-2003)

Sales value

(2003)

Information 50% NAa 50% $475

Other industriesb 45 48% 27 1,616

Manufacturing 36 44 26 25,154

Wholesale Trade 33 33 30 7,736

Professional, scientific, and technical services 16 23 14 497

Utilities 16 NAa 16 246

Finance (except depository institutions and insurance)c 15 15 14 265

Miningd NA NA (5) 453

Total 33% 39% 26% $37,757
Appendix IV

U.S. Foreign Direct Investment and U.S. 

Affiliate Sales in China

Page 68 GAO-06-162 China Trade

Table 18: Manufacturing Affiliate Industry Group Sales in China by Annual Growth Rate (1995-2003) and Sales Value in 2003

Source: GAO analysis of Department of Commerce, Bureau of Economic Analysis data. 

Note: We adjusted these data for inflation and expressed them in 2004 constant dollars. 

a

BEA does not have figures for computers and electronic products from 1995 to 1998.

Dollars in millions

Annual growth rate (percent)

Manufacturing affiliate industry group

Overall 

(1995-2003)

 First 5 years 

(1995-1999)

 Last 4 years 

(2000-2003)

 Sales value

(2003) 

Transportation equipment 47% 90% 32% $1,098

Computers and electronic products 39 NAa 35 13,223

Chemicals 24 38 14 3,894

Food 25 52 13 721

Primary and fabricated metals 23 45 12 753

Machinery 14 25 9 1,163

Electrical equipment, appliances, and components (9) (6) 28 873

Total 36% 44% 26% $25,154
Page 69 GAO-06-162 China Trade

Appendix V

GAO Contact and Staff Acknowledgments ApendxiV

GAO Contact Loren Yager (202) 512-4128

Staff 

Acknowledgments

In addition to the individual named above, Adam Cowles, Assistant 

Director; Ming Chen; Leah DeWolf; Grace Lui; Jamie McDonald; Yesook 

Merrill; Nina Pfeiffer; Paul Revesz; Tim Wedding; and Seyda Wentworth 

also provided assistance.

(320344)
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