Empirical Study On The Change Character Of China's Current Account And Its Influence Factors

Keeping huge surplus in current account has been the main characteristic of balance of payment in China currently. China's current account has been holding huge surplus since 1994, the size of surplus and the ratio of GDP from 69.08 hundred million dollars and 1.369% in 1994 rise to 1608.18 hundred million dollars and 7.197% in 2005. The exiting of huge current account surplus in China has not only increase complexity and difficulty on macroscopic readjustment and control, and increase appreciation pressure of RMB and trade friction, but also go against the mode changing of economic growth and the course of structural readjustment, and has brought negative effect to China's economic development. Hence, the problem how to effectively adjusting the current account huge surplus has been taken much count of by government, many scholars has studied the problem and brought forward different viewpoints, but the empirical study relate to the problem is few, especially the systemic and general empirical study. Along with the degree of national economic dependence on outside world keeping improve and government's"hold basic balance of international payments"macroeconomic object, it is especially important to study the problem about China's current account. Therefore, this paper including eight chapters empirically studies the fluctuation of China's current account and its influence factors, and the concrete contents are as follows:Chapter one is the introduction. It outlines the background, study object as well as significance of this paper, illustrates and delimits some important concepts related with this paper, thus, these work provide analytical precondition and researching framework for latter study.Chapter two is the summary and evaluation of literatures. Firstly, through combing the research vein of current account determinant theory, mainly reviews and brief evaluation the academic points of price-specie automatic adjustment mechanism, elasticity of exchange rate, multiplier approach, absorption approach, structural approach, current account Intertemporal Approach, two-sector capital growth rate and caipital account financing theory; Secondly, author of the paper reviews and evaluates the empirical study about current account from different point of view.Chapter three is the changing character of current account and the experience description of influence factor. Firstly, summarizing the change trend of China's current account in 1982-2005, in order to mastery the basic thing of current account; Discussing the structure character of current account, mainly about the makeup of goods, service and investment profit; Analyses the relation between current account and saving-investment imbalance, in order to identify the relation between interior imbalance and exterior imbalance; Discuss the"twin surpluses"phenomenon in balance of payment between current account and capital account. Secondly, from the perspective of trade, saving-investment balance and international capital flow, author of the paper analyses the affect mechanism of exchange rate, fiscal deficit, the change in age structure, total factor productivity and capital account to current account.Chapter four empirically studies the impact of the fluctuation in RMB Exchange Rate upon current account. From the angle of trade, empirical research is made on the influence of direction and degree of RMB exchange rate, domestic demand and foreign demand upon current account. Firstly, author of the paper empirically studies the impact of RMB exchange rate, domestic demand and foreign demand upon goods trade, and interprets the empirical result from the angle of trade structure and term of trade, discovers that domestic demand and foreign demand are the main factors to current account surplus, RMB exchange rate has lag effect to current account; Secondly empirically tests the impact of RMB exchange rate, domestic demand and foreign demand upon services trade, finds that domestic demand is the main factor to services trade deficit; Finally empirically studies the impact of RMB exchange rate to investment profit, finds that RMB's depreciation attracting more foreign direct investment inflow, and improving the investment profit outflow, consequently deteriorating current account.Chapter five is the empirical study of the factors on current account from the visual angle of saving-investment imbalance. Firstly, empirically tests the impact of the budget deficit on the current account within a 5 variables system including nominal interest rate, nominal exchange rate and GDP; Secondly, empirically tests the impact of the age composition of population upon current account within a 3 variables system including real income; Thirdly, empirically tests the impact of the total factor productivity upon current account within a 3 variables system including investment. The empirical result shows that the increase of budget deficit, real income and total factor productivity, and the decrease of gross dependency ratio are the main factors in causing current account surplus.Chapter six is the empirical study of the factors on current account from the visual angle of international capital flow. Firstly, empirically tests the impact of the capital account surplus on the current account within a 4 variables system including real exchange rate and GDP; Secondly, empirically tests the impact of the capital account structure upon current account within a 5 variables system including direct investment, portfolio investment, other investment and GDP. The empirical result shows that capital account is the main factor in causing current account surplus; while among the makeup of capital account, direct investment has the most effect on current account.Chapter seven compares the empirical conclusion with the experience description and policies suggestion. This chapter compares the empirical results of chapter 4, chapter 5, chapter 6 with chapter 3, general evaluates and judges the factors impact current account in China, and puts forward policy advices of adjusting current account huge surplus, provides references for China implement measurable opening and international payment policy.Chapter eight is the conclusion of this paper, its limitation and the expectation of future research. In this part,summarizes the conclusions of above chapters and puts forward author's viewpoint on the limitation of this paper and future research.The innovation of the paper lies in 3 aspects. (1)in the empirical test of the influencing factor of current account from the perspective of trade, not only consider the effect of exchange rate, domestic demand and foreign demand upon goods trade, but also the effect upon services trade and investment profit. (2)from the perspective of saving-investment gap, the effects of the fiscal deficits, the age composition of population and total factor productivity to the current account in China are test by the co-integration VAR model, the general impulses response function and the Granger causality test. (3)from the perspective of international capital flow, the effects of the capital account surplus to the current account are test by the co-integration VAR model, the general impulses response function and the Granger causality test; the effects of direct investment, portfolio investment and other investment to the current account are test by the LA-VAR model and variance decomposition.