This raises the question of whether it is possible to improve upon these approaches, and obtain another estimate of the markup, possibly lying in-between those from Methods A and B. To achieve this, we will have to rely on data beyond that of Hong Kong imports and re-exports since, as explained above, this data does not distinguish the Hong Kong imports from China that are destined for the United States from those that are destined for elsewhere. This means that the difference in prices of these imports, illustrated by $1.10 and $0.90 in Figure 1, cannot be measured from the Hong Kong data. In order to measure these prices, we rely instead on the Chinese export data from the General Customs Administration. Using that data, we can distinguish a unit-value for Chinese exports to Hong Kong, destined for the United States, from the unit-value for Chinese exports to Hong Kong that are destined for all other markets. It turns out that the goods destined for the U.S. tend to have higher prices than those destined elsewhere, as illustrated in Figure 1. By merging the China export data with the Hong Kong import and reexport data, we are therefore able to make a more accurate calculation of the markup, indicated by Method С in Figure 1.
In Method C, we use the Chinese export data to measure the unit-value of goods exported to Hong Kong and destined for the U.S. ($1.10). This is compared to the unit-value of Hong-Kong re-exports from China to the U.S. ($1.50), giving a markup of $0.40 or 27% when expressed relative to the re-export value of $1.50. In the final column of Table 2, we report the results from a calculation of this type, using both the Chinese and Hong Kong trade data.9 We see that Method С gives an estimate of the markup that varies between 22% and 28.7% over 1988-1995, and lies in between that obtained from Methods A and В in every year. Thus, we can treat Methods A and В as providing upper and lower-bounds, respectively, to the “true” markup, and view Method С as giving the preferred estimate. Our calculations have shown how the differences between the interagency report and the Hong Kong Census can reconciled, and improved upon, to obtain an estimate of the markup that lies in-between these two sources. payday loan help