A Research On The China's Current Account Imblance

China's current account has been holding surplus since 1994, the size of surplus and the ratio of GDP from 69.08 hundred million dollars and 1.4% in 1994 rise to 2532.7 hundred million dollars and 7.3% in 2006. With the development of foreign trade, China has become the leading origin country of trade deficit for Euro-American countries such as America, and this arouses great discontentment among them in the international world. Besides, for our country the existing of huge current account surplus has brought negative effect to China's economic development. Current account balance has become an important target of China's Macroeconomic regulation and control. Under these backgrounds, this paper has practical significance for China's current account as its theme.This paper starts from the development course and the overall characteristics of China's current account, verifies that continuous current surplus of China is a state of imbalance with the basis of empirical research methods, and searches for the degree of current account deviation from equilibrium within the frame of the internal and external balance of a country's economy. Then take the Sino-US trade imbalance as example, this paper summarizes the pecific forms of China's current account imbalance according the analysis on the reasons and essence of the Sino-US trade imbalance. This paper goes to the fundamental reason for China's current account imbalance integrating to saveing-investment balance approach to the current account, and finally point out the correlative solving measures. The paper consists of 6 chapters as follows.Chapter 1: Preface. In this chapter, significane of this paper is introduced. Current researches status, basic structure and research motheds to this paper is also intrudocud. And finally this chapter points out the innovation and inadequate of this paper.Chapter 2 studies the development course of China's current account as well as the analysis of overall characteristics and thus plays a good foreshadowing role for the following research. According to the condition of China's current account surplus and deficit, the development course of current account between the year of 1982 and 2006 can be divided into four stages, that is, surplus reduction, overall deficit, overall surplus and surplus enlargement. During these 25 years, the current account of China shows a overall characteristic of continuous surplus, and that can be analyzed from four aspects: firstly surplus in commodity trade determines current account surplus; secondly the small trade scale of services is not enough to change the trend of current account surplus; thirdly the income and profit account has a new change from long-term deficit to surplus; fourthly China is a country of net transfer acceptance due to the continuous surplus of current transfer account.Chapter 3 is the empirical analysis and test of current account imbalance. It at first tries giving a definition to current account imbalance from the perspective of intertemporal trade, then discovers that the estimated value of current account gotten from intertemporal analysis has a great deviation from the real value after using intertemporal approach to the current account (present-value model of current account) to empirically verify continuous surplus of China's current account between the year of 1994 and 2005, and finally comes to the conclusion that the continuous current surplus of China is a state of imbalance. On this basis, this paper attempts to search for the degree of current account deviation from equilibrium. With the help of the Macroeconomic Balance Approach which was developed by IMF, current account imbalance is brought into line with the internal and external balance of a country's economy, while balanced current account is defined as the current account value when underlying current account balance is equal to target capital account balance. It is necessary to note that the fundamental purpose of the Macroeconomic Balance Approach is to estimate the degree of real exchange rate deviation from equilibrium. Its guiding significance for the research on China's current account imbalance is that it not only verifies the fact of China's current account imbalance from the view of one country's internal and external economic balance but also provides a method to test the deviation degree of China's balance of current account in each year from medium equilibrium level. According to the calculation, the deviation degree of China's balance of current account from medium equilibrium level in 2005 is 4.99% of GDP, at the same time real effective RMB exchange rate is estimated to be undervalued by 6.29%.Chapter 4 analyzes the specific forms of China's current account imbalance. This chapter starts from discussing that the imbalance of foreign trade between China and America is of most importance in the imbalance of China's current account, then explores the reasons for foreign trade imbalance between China and America from three factors: statistic factor and economic factor as well as human factor, and then attains the essence of this imbalance as follows: (1) America is the real winner in this imbalance; (2) America gains more profit from trade friction, and finally summarizes the specific forms of China's current account imbalance as: (1) China is providing cheap capital to the outside when it provides cheap labor to other countries and regions; (2)China expands the imbalance of Chinese regional economy when subsidizing foreign consumers with export drawback; (3) China has a disadvantageous allotment pattern in foreign trade surplus; (4) China takes a passive position in trade friction; (5) China falls into a difficult position into which the dollar lands itself when it is devalued to currencies of other major countries in the world.Chapter 5 studies the forming process of China's current account imbalance and the analysis of the nececesity on the adjustment current account imblance. After probing into the correlative theories and definition, integrating with the special characteristic of resources endowment---that is the dual-economy economic structure and the infinite supply of labor, this chapter outlines the forming process of China's current account imbalance with the Saveing-investment Balance Approach, and reveals that the fundamental stone which causes China's current account imbalance is the imbalance of income distribution under infinite labor supply. Furthermore, it discusses that China forms an economic growth mode that economy is dependent on investment and the pull of export in the forming process of China's current account imbalance. However, this mode is not sustainable at present, so it is necessary to coordinate China's current account imbalance to promote the sustainable development of China's economy.Chapter 6 is about the adjustment measures of China's current account imbalance. It begins with the situation of China's national income imbalance from the perspective of national saving. Since national income imbalance influences current account through its influence on consumers, this chapter further proves that national income imbalance can cause consumption depression. Moreover, it puts forward the adjustment measures from three aspects: adjusting the income gap between rural areas and cities, adjusting income allotment between corporation and government and the residents, and adjusting the income gap among urban residents.The innovation of this paper lies in 3 aspects: (1) With the intertemporal approach to the current account, the empirical analysis proves that the continuous current account surplus of China between the year of 1994 and 2005 is a state of imbalance; (2) This paper uses the Macroeconomic Balance Approach which is not common in our country to analyze the degree of current account deviation from equilibrium.(3) Starting with the special characteristic of resources endowment----dual-economy economic structure and infinite supply of labor, this paper analyzes the forming process of China's current account imbalance and reveals that the fundamental stone which causes China's current account imbalance is the imbalance of national income distribution under infinite labor supply.