Banque de France analyzes China's trade data divergence

Since 2021, the gap between China's trade surplus as measured by customs and the figure published in the balance of payments has widened markedly.

In 2022 and 2023, China's trade surplus was significantly higher according to customs data than according to the balance of payments, with the customs figure rising from 2.9% to 4.6% of GDP, while the balance of payments figure increased moderately from 2.8% to 3.3%.

This divergence reflects methodological differences, as customs authorities record goods crossing national borders, while balance of payments data records transfer of ownership between residents and non-residents, in line with the 6th Balance of Payments Manual (BPM6).

For instance, in 'factoryless manufacturing,' where a foreign firm subcontracts production in China, the balance of payments records an import reflecting the value added by the foreign firm, while customs records no transaction if goods do not cross the border.

Such gaps are frequent and observed in numerous other countries, including France, Germany, and the United States, although often in the opposite direction or with greater stability over time.

For many countries, customs data are adjusted to comply with BPM6 guidelines, adding trade in goods that change ownership without crossing a border (e.g., merchanting, goods procured in ports) and subtracting trade without ownership transfer (e.g., gifts, goods for repair).

In China's case, the widening gap since 2021 is attributed to a change in data source.

Previously, Chinese balance of payments authorities used customs data; now they use data reported by firms and banks to factor in ownership changes directly, as noted in an IMF report.