国际金融英语论文

The Adjustment Of Chinese Balance Of Payments

In recent years, Chinese economy maintains rapid growth. Current account surplus increases fast while capital and financial surplus also remain high, which is called double-surplus, making the balance of payments out-of-balance and causing a series of negative effects. The imbalance doesn’t only relate to domestic economy development, but also closely relates to the environment of global economy.

Refer to Chinese balance of payments statements from 2005 to 2012, we can find out that the overall surplus remained rising year by year. In 2010, economy grew stably.The elasticity of exchange rate was enhanced while the reform of RMB exchange rate formation mechanism was pushed forward steadily. The balance of payments remained the pattern of double surplus. In 2010 current account surplus was 305.4 billion dollars and capital and financial surplus was 226 billion dollars. At the end of this year, foreign exchange reserve in our country is 280 million dollars, with year-on-year growth of 18.7 percent. Chinese balance of payments continued to expand, which indicates that our country's economic opening-up had been furthering and the amalgamation of Chinese economy and the global economic system was deepen. Moreover, the imbalance of Chinese balance of payments was still serious. The trade surplus in 2010 hit a record high of 305.4 billion dollars. Foreign direct investment in China also remained high and reached up to 185.1 billion dollars. The scale of foreign debt was further increased. The scale of foreign-exchange reserve had been up to 280 million dollars by the end of 2012, which was 3.5 times more than that in 2005.

Several reasons lead to the imbalance:

First, the enhancement of external trade competitiveness enlarged the net balance of current account. For China, there is great competitiveness in labor intensive products and low technology products. Entering into WTO makes the trades with members of WTO tend to be freer. Foreign country gradually cancelled the restriction of import quotas from China. At the same time, some technology-intensive products of our country are getting less disadvantaged. The advancement of advantage in trade competitiveness boost our export growth, causing current account surplus. Second, domestic investing environment is continuously improved. International investment is on the rise. In recent years, Chinese macro-economy developed stably. The robust economic growth has been sustained. GDP increases at the rate of more than seven percent every year. In the meantime, China are continuously improving investing environment, including improving base installation and perfecting laws and regulations, which attracting a great amount of international investors to make direct investments in China. If direct investments enter our country in the form of physical resources, they will become domestic resources and raise productivity. If it is invested in the form of currency, and be used to buy physical resources. It means that foreign capitals profit from using our resources. That will accelerate the consumption of our resources, increasing our ability to export. Thus balance of payments surplus is affected positively.

Thirdly, China has been deeply influenced by the concept “emphasize export, despise import” for a long time. Early mercantilist thought all kinds of imports will decrease the quantity of home currency, and this kind of decrease had bad effect on home economic development, they think we should buy less from foreign countries or even not buy anything. They advocated encouraging exports, and considered that more export is better. Foreign Trade Multiplier Theory supports the idea that exports can fuel economic growth. It is said that two facts brought about this kind of trade pattern in China. One is that in the 1980s, we don’t have the capability of importing

urgent-needed Technology products and strategic resources because of shortage of foreign exchange. Another reason is that Chinese long-term planned economy foundation made it relatively closed for domestic market and management policy. Thus idea was formed that import would occupy domestic markets and have impact on domestic industries.

The last point, local enterprises’ strategy of “going out” is still in the immature stage. China has gradually turned from simply absorbing foreign capital into the period of both “bringing in” and “going out”. But there are still problems existed in the idea of “going out”, like problems in those enterprises themselves, laws and regulations supported by governments, relative policies and so on.

Here are some measures I think should be taken to adjust the balance of payments:

First, we should use foreign capitals scientifically and rationally, changing the way how we use them. According to the national industrial policy and regional development strategy, we should strengthen the guide of foreign investment and regulate the behavior of capital introduction, avoiding vicious competition among countries for intruding foreign capitals. Labor rights should be improved appropriately, the pattern of resource and environmental cost should be adjusted, and those foreign investment projects which are low-technology, take up many land resources, consume energy high and generate high levels of pollution should be restrained.

Second, we could enlarge domestic demand, especially consuming demand, to make contribution to economic growth, lessen dependence on exports for growth to eliminate the influence by long-term huge trade surplus. At the same time, hampering the excessive growth of investment in fixed assets.Domestic demand and overseas market demand should be harmoniously developed. Thirdly, prudent monetary policy should be adapted. We can control currency supply reasonably and issue special bonds for central bank bills to strengthen liquidity management. Or we can take flexible use of interest-rate adjustment means.

Last, international policy coordination should be reinforced, the trade imbalance doesn’t only stem from Chinese own structural disequilibrium, but also partly stem from structural problems from its trade partners. By strengthening international policy coordination, trade imbalance can be tackled more effectively.

Years of surplus take negative effects on economy. For the development of China, It is necessary for all of us and government to pay more attention on the adjustment of Chinese economy.

专业:金融学

姓名:顾诗佳

学号:f11041209