Research On Sino-U.S. Economic Relationship In The Perspective Of Finance

Global economy changes rapidly since 1990s. China and the U.S., which is the fastest-growth developing country and the richest developed country in the world, has been the engine of world economic growth. However, the economic relation between the two countries has been more and more imbalanced. The imbalanced economic relation has also been the impetus and a vivid example of global imbalance, and it becomes much more complicated after the global financial crisis. As a matter of fact, the economic relation between the two countries has transformed from general bilateral relation of trade and investment into the relation between"Financial Country"and"Trade Country". The factors and changes in the two countries'financial sector, which lead to the transformation, can explain the imbalanced economic relation to a great extent. So the research on the imbalance of economic relation between China and the U.S. has both theoretical and practical significance.The dissertation contains seven chapters. The first chapter is introduction. In this chapter, background of the topic and theoretical and practical significance is elaborated, related literature is reviewed, the structure arrangement and research method is clarified, and the innovation and shortness is given.The second chapter is the development and imbalance of the economic relation between China and the U.S. Since 1990s, the economic and financial globalization changes fast and has great impacts on global economy. The two countries involved in the process of globalization in different ways, which affected the international trade division significantly. The way China involved in the globalization can be concluded as: first, China has attracted more and more FDIs; second, China has become the famous"World Factory"which mainly produces manufactory products with low-added value; third, China has been a large economy which export a lot; fourth, China's foreign reserves increases fast which makes China invest abroad. The way that the U.S. involved in the globalization can be concluded as: first, the upgrade of domestic industrial structure promote the global industry transfer and adjustment, and alter the global trade relations; second, the U.S. is one of the world's most important sources of FDI; third, the U.S. is the biggest importer in the world; finally, the U.S. enjoys the world's largest portfolio investment inflows due to dollar's key currency status and highly developed financial markets. In the process of participating in economic globalization, the Sino-U.S. bilateral trade and investment relations have become increasingly close. At the same time, the imbalance of Sino-U.S. economic relations has also been more and more severe. The imbalance of trade relations can be concluded as: the U.S. has accumulated large trade deficit with China, while China has accumulated huge trade surplus with the U.S. Further more, the interdependence of trade between the two countries is non-symmetry, which means that China highly relies on the export market of the U.S. while the latter doesn't rely on China's export heavily. The imbalance of investment between the two countries is mainly structural imbalance. On the one hand, the U.S. makes direct investments to China a lot, while China has a large number of U.S. securities investments. On the other hand, the U.S. securities investment of China concentrates in low-risk bonds and other financial assets, while the portfolio investment that the U.S. makes in China are mainly high-risk financial assets such as stock. The imbalance continues to strengthen China as the largest creditor nation to the U.S. and the U.S.'s position as the world's largest debtor. Moreover, the dependence between the two countries is non-symmetric. The nature of Sino-U.S. economic relation is the"capital-commodity"dual cycle.The third chapter is the analysis of the reasons of Sino-U.S. economic relationship imbalance from the perspective of finance. The evolution of international monetary system contains Gold Standard, the Bretton Woods System and the Jamaica System or Dollar Standard. There is"center and periphery"pattern in each period. Under dollar standard, the U.S. is"Financial Country"who has financial hegemony. As a peripheral country, China has become the"Trade Country". The Sino-U.S. economic relation have transformed from general bilateral trade and investment relation to the relation between a"Trade Country"and a"Financial Country". This pattern is caused by dollar standard, and it determines the mode of Sino-US economic and financial development and result in the imbalance. More importantly, there is a self-reinforcing mechanism in the imbalance under dollar standard and it deactivates the traditional foreign exchange policy instrument. The financial development in China and the U.S. varies a lot. China is left behind in financial openness, financial structure and financial efficiency. The variance in financial development leads to saving-investment imbalance in the two countries, determines the positions in international industry division, and finally causes the Sino-U.S. trade imbalance. The variance in financial development affects the capital movement and causes the Sino-U.S. investment imbalance. Besides, the Sino-U.S. financial linkage leads to the imbalance too. The result of empirical research shows that the variance in financial development is positive linked with the Sino-U.S. economic imbalance, which means that the bigger the variance is, the severer the imbalance is.The fourth chapter is the sustainability of Sino-U.S. economic imbalance. Dollar standard is the root of the imbalance, so the sustainability of dollar standard determines whether the imbalance can persist or not. Actually, dollar standard is the root of global liquidity glut and global financial turbulence. The liquidity caused by dollar standard has contagion effects on"Trade Countries". The over innovation of financial market in the U.S. is also an important reason for global liquidity glut. Besides, dollar standard increase the global financial risks by aggravating global interest fluctuation and accelerating global capital flows. As a result, dollar standard also affect global economy negatively. In long term, the reform of international monetary system is an inexorable trend, which determines the unsustainability of dollar standard. But in short term, dollar standard can still persist. So the sustainability of Sino-U.S. economic imbalance can be concluded as: persist in short term but vanish in long term. The financial development mode of the U.S. in 1990s is typical self-reinforcing, and it determines that the financial development is unsustainable. After the global financial crisis, the U.S. will attach great importance to the development of real economic sector and shrink financial sector. Since 2005, the financial reform in China develops fast in the perspective of openness, structure, and efficiency. The trend will persist in future. So looking forward, the variance of financial development between the two countries is getting smaller and smaller, and this will rebalance the Sino-U.S. economic relation.The fifth chapter is Sino-U.S. economic relation under the global financial crisis. The U.S. sub-prime crisis contains the following stages: outbreak, shortage of liquidity, credit crunch, and hit real economy. In September 2008, the U.S. sub-prime mortgage crisis evolved into the global financial crisis. U.S. Federal Reserve's monetary policy mistakes, and the resulting global economic imbalances caused by excess global liquidity, and the United States over the absence of financial innovation and financial supervision is the main reason for causing the crisis. In essence, the current round of global financial crisis is the result of excessive growth of virtual economies. The crises had a significant impact on the imbalance, and promote its change. First, the U.S. real economy recession led to an overall decline in import demand, leading to scale down its imports to China; Second, the U.S. government began to adjust and continue to use trade policy to restrict imports, China became the largest U.S. trade protectionism victim; it is also an opportunity to adjust China's investment structure; Finally, China's large dollar reserve assets is risking due to increased volatility in dollar exchange rate, and the Chinese monetary authority is bound to take active measures. In the post-crisis era, Sino-U.S. economic relation is affected by a number of factors and constraints: First, the Fed's loose monetary policy and the withdrawal time. Second, Sino-U.S. economic restructuring policy. On the one hand, China's policy of expanding domestic demand would be helpful to reduce the current account surplus; on the other hand, the level of U.S. consumer savings rate continued to decline and will continue to increase to some extent, reduce its current account deficit and reduce the dependence on foreign capital. Third, the current international monetary system reform. The United States will have to reform the international monetary system and other major issues, and listen more to developing countries; Finally, the accelerated process of internationalization of RMB. RMB internationalization process of accelerating the formation of the impact on the dollar standard system, and help alleviate the imbalance of Sino-US economic relations. However, it will be a long process.Chapter six is the imbalance of Sino-U.S. economic relation and China's transformation of economic and financial development policies. The imbalance affects China a lot. First, it delays China's industry structure upgrading and aggravates trade frictions; Second, it strengthen the contradiction of real economy and virtual economy; Third, it disables China's monetary policy and foreign reserve management policy, and leads to the politization of RMB's exchange rate reform. This will enhance China's economic structure adjustment. As a result, China should take active measures to transform economic and financial development strategies. From the perspective of economic development strategy changes: first, the government should change the current investment and export-led economic growth in the manner and speed up the social security system and steadily increase disposable income. Second, the change in the current low value-added processing and export mainly manufactured goods trade strategy, develop high-end manufacturing and services. Finally, positive adjustment and changes in the existing strategy of attracting investment and gradually expanding foreign direct investment. From the perspective of financial development changes: first, by improving the legal and regulatory systems and other measures to promote the development of capital markets. Second, speed up the RMB exchange rate reform, and accelerate the pace of domestic economic restructuring. At the same time, strengthen the U.S. strategic dialogue and cooperation, to reduce external pressure to reform, as the domestic economic restructuring for more time. Finally, develop currency exchange cooperation actively with neighboring countries, and promote the reform of domestic related fields to participate in East Asian monetary cooperation and the reform of the international monetary system and the construction of an offshore RMB market, etc.Chapter seven is conclusion.