China’s Balance of Payments Analysis Report

Topics: Macroeconomics, International economics, Bretton Woods system Pages: 7 (2212 words) Published: March 21, 2011
Assignment 2

China’s Balance of Payments analysis Report


In recent years, China’s balance of payments always keeps “double favorable balance”. In 2005, China’s national economy developed quickly and stably. The exchange rat of RMB became more flexible. The current account surplus increased obviously and the capital account surplus decreased. The foreign exchange reserve still increased quickly. In 2005, Chinese government did some fiscal policy and monetary policy. Such as decreased government expense, raise the tax rate, used managed floating system, improve the foreign exchange management, enlarged the foreign exchange market. We can conclude that china’s BOP will still keep “double favorable balance” and keep increase stably and strongly in the future years.

As we all know, China is the biggest developing country in this world. China’s economy status has being more and more important for the global economics. In recent years, china did some policies to keep economy growth quickly. So in this essay, First, I will introduce and analyses some main data of the China’s BOP. Then discuss the influence of BOP surplus. After that I will analyze the Chinese moderate economic policy and discuss the RMB appreciation. At last I will make some conjecture about the Chinese future economy development and future policy. Next is the text. Text

In 2005, Chinese economy kept stable and fast growth and foreign trade increased quickly. The foreign business direct investment keep great amount. The balance of payment continued “double favorable balance”. The current account surplus was160.8 billion dollars, the capital and the capital and financial account surplus was 63 billion dollars. The national foreign exchange reserve increased 208.9 billion dollars. Next I will introduce and analyze the China’s BOP in 2005.

1. Current account:
In 2005, China’s current account surplus was160.8 billion dollars, it increased 134% than 2004, because merchandise trade surplus increased largely. Merchandise trade balance: in 2005, the merchandise trade surplus is 134.2 billion dollars, increased 128%. Export is 762.5 billion dollars and import is 628.3 billion dollars. Export increased 28% and import increased 18%. So we can find some characteristic: export still keep increasing quickly, import increasing slower than before year. But the reason is complex. Form local point, It is because of the national macroeconomics regulate and control. Such as increase the car import tax and some preferential policy for the exporter. Form global point, the reason is global economy growth quickly, increasing market demand and EU’s quota canceled. Services balance: service trade deficit is 9.4 billion dollars, decreased 3%. In which, Transportation deficit is 13 billion dollars, increased 4%. Insurance service deficit is 67 billion dollars, increased 16%. Travel and other business service items are surplus. They all have some certain increased. Form these data, we can find the services trade scale is enlarging and the deficit is decreasing step by step. Compare with the Merchandise trade, service trade is lagged, the ratio of the Merchandise trade and service trade is 10.2:1, and it is higher than the world average level (4.2:1). So we can find Chinese service industry is lagged and the open to the external world is relatively lower. The service trade structure is not balance, high additional value or high technology service trade worse than the foreign country, such as IT, financial service and communication service. This is a problem which we should solve in the future. Income balance: in 2005, income surplus was10.6 billion dollars. But in 2004, it was deficit of 3.5 billion dollars. Unilateral transfers balance: Unilateral transfers balance is surplus of 25.4 billion dollars, increased 11%.

2. Capital and Financial Account
In 2005, Capital and financial account is surplus of 63 billion dollars,...
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