The Nature of US-China Trade in Advanced Technology Products

This paper studies the nature of US-China trade in advanced technology products (ATP). China's recent surge in ATP exports has promoted active debate about the implications for both China's economic growth and US competitiveness. We evaluate the development of both countries' ATP trade classification systems. Although the definition of ATP for statistical purposes is largely convergent, China adopts multiple definitions of ATP, some of which are associated with export promotion and foreign direct investment (FDI) policy. We develop a method to compare US and Chinese trade data that combines the strengths of both countries' trade statistics and accounts for re-exports through Hong Kong. The emergence of China as a major exporter of ATP goods to the US, coinciding approximately with China's WTO accession is strongly associated with processing trade and production fragmentation, foreign-invested enterprises, and the use of economic policy zones, more so than for Chinese exports as a whole. This evidence demonstrates that China's pattern of exports has been strongly influenced by government policies.