Trade Imbalance Of China

The present paper from the intertemporal trade angle of view, finds the crucial factors to theintertemporal comparative advantage and analysis the conduction mechanism through establishingthe theory model and econometric analysis. The present paper reveals the causes that influence thetransformation of the current-account surplus to deficit by the historical comparison of internationaltrade imbalances and shows the generality and particularity of China's trade imbalance structure bythe international comparison. The present paper also analyzes the economic effect of China's tradeimbalance, and put forwards the adjustment opinion to change the intertemporal comparativeadvantage of China.China's persistent trade surplus began in1994and has lasted up to now for nearly twenty years.Persistent trade surplus existing in China and other Asian countries and trade deficit continuing inthe United States and European countries together constitute the world economy imbalance. China'strade imbalance is a part of the world economy imbalance. China's trade surplus sustains growthexcepting the years when the Asian financial crisis occurred and China accessed to the WTO.Especially in2005, trade surplus growth accelerated relatively going up218%than last year. Theyear of2005is a turning point of China's "double surplus" pattern. Before2005, China mainly hadcapital account surplus. After2005, China mainly had the current account surplus, in which thetrade surplus is the most important part. Since the beginning of2009, the overall size of China'strade imbalance began to decrease.Trade imbalance exists not only in China. According to intertemporal trade theory,intertemporal comparative advantage and Intertemporal consume preference influence theconversion of trade surplus or deficits. Intertemporal comparative advantage will change wheneconomic characteristics, industry structure and international division change. Trade history ofUnited Kingdom, United States, Germany and Japan also experienced the conversion of tradesurplus or deficits. When they have a deficit, they have future productive comparative advantage.When they have a surplus, they have present productive comparative advantage.China's trade surplus displays several characteristics:The proportion of processing trade is toolarge; foreign capital enterprises dominate the foreign trade; the upgrading speed of productstructure and industry structure is slowlyï¼›Energy demand and consumption is too large with thedeterioration of the environment; trade imbalance objects are concentrated; the development ofservice trade lags. Comparing to the trade surplus of the United Kingdom and the United States,China's trade surplus is also closely related with population growth, but lacking of advancedtechnology support system. At the same time, China is lack of stimulation of domestic consumptionand social inequality grows. Comparing to the trade surplus of Japan and German in the sameperiod, trade dependence rate of the three counties is high but China's commodity structure is more backward and industrial upgrading is not obvious. Trade market structure of the countries isconcentrated except Japanese. Different from other countries, China's proportion of processing tradeis exorbitant and FDI influences the trade imbalance seriously.Though the co-integration analysis based on the time series, we find the balance of trade inChina and real interest rate, financial development, saving rate, industry structure, populationstructure and insitution have co-integration relationship in a long-term. The real interest rates,saving rate and industry structure have significant influence to the balance of trade. Saving rate andindustry structure is the granger cause of the trade balance. Although, trades has many positiveeffects such as promoting the development of economic and employment, also raising the elementpayment and optimizing the allocation of resources and extending people's consumption choice andpreparing conditions for foreign investment. But the trade imbalance malpractice is becoming moreand more obvious. The performance of Trade imbalance is wasting resource and sensitive toenergy fluctuations and deterioration of the terms of trade, increasing trade friction and appreciationof exchange rate, loss of foreign exchange assets etc. Trade imbalance is neither good nor bad, butdue to the structural characteristics of China's trade imbalance, it is not sustainable. According tointertemporal trade theory, we should solve advance the structure of industry and develop serviceindustry relying on innovation to improve productivity in the future. We also should expanddomestic demand and invest abroad to slow down the dependence on external markets.