Research On The Balance Of Payments Structure's Sustainability

Along with the internationalization of the RMB,the opening up of capital account is an inevitable choice.International financial history tells us the balance of payments structure may be unsustainable,after opening capital account and encountering serious external shocks.Eventually,it will block or even reverse the process of currency internationalization.So it has extremely important theoretical and practical significance to explore the balance of payments structure's sustainability.We establish the sustainable problems of balance of payments structure,global imbalance and liberalization of capital account(monetary internationalization)under a unified framework.That's we can give advice to open economies and provide a new research perspective for the solution of global imbalances and RMB internationalisation.Since the surplus capacity of current account and capital-financial account will directly determine the balance of payments' situation.The financial competitiveness and industry competitiveness are the deeper determinant of this two accounts' surplus capacity.So we intend to explore the balance of payments structure's sustainability from the dimension of these two competitiveness.When analyzing the relationship between financial competitiveness and capital-financial account balance,we firstly introduce the theory of comparative advantage to the international trading of financial assets' field and construct a theoretical model.In the case of other conditions unchanged,the rising in cost of financial assets will reduce the net output of these risky financial assets,and the improvement of the investors' legal protection is advantageous to the net output of risky financial assets.Next,we use the panel data of the G20 countries to test the conclusions of the theoretical model.And find that the decrease of cost of capital will cause the net exports financial assets as a share of GDP fall significantly.And the investor protection index which construct by legal system,financial market and credit system,will promote the development of the financial assets' net output though financial development.So if we want to enhance the balance of payments structure's sustainability though capital and financial account channel,we need to strengthen the investor protection system,improve the financial system,reduce the cost of financial assets,improve the financial sector's international competitiveness,to enhance the country's financial assets to attract foreign capital,then the capital and financial account surplus ability can be improved.When analyzing the relationship between industrial competitiveness and current account balance,we firstly establish some statistical indicators based on trade in value-added data(TiVA)to analyze the general competitiveness of manufacturing industry and foreign exchange earning ability in China and U.S..We found that the manufacturing industry of China is big but not strong.In further comparison with subdivided industry,we find that the low-tech manufacturing is China's advantage.And China is only engaged in the assembly process which is located in the downstream of the industrial value chain.Besides,the participation is reducing year by year.On the contrary,the United States dominated the upstream of the industrial value chain,not only take the lead in high-tech manufacturing field,but also expand this gap.Next,we look for the fundamentals of foreign exchange earning ability,balance of payments structure's sustainability from the perspective of industrial competitiveness subdivision.According to the empirical analysis we find that both labor costs and labor productivity determine the size of a country's industrial competitiveness.For instance,the rise in labor costs will weaken the international competitiveness of manufacturing industries,reduce the net exports of goods and services.While the rise in labor productivity can effectively offset the adverse effects caused by labor costs,and promote the net export significantly.Finally,we analyze the developing trend of this two competitiveness in both China and U.S..The result shows that China's labor productivity is still far behind the United States',although it is rising.While China's labor costs are far behind the United States',but rising fast(overtaking India)and surpass the growth rate of labor productivity.That leads to the decline in industry competitiveness.So if China wants to strengthen the balance of payments structure's sustainability through the current account channel,it must implement the manufacturing industry's transformation and upgrading quickly,offset the adverse effects caused by labor costs by improving labor productivity,improve the industry competitiveness in order to enhance net output of the product and current account surpluses abilities effectively.In conclusion,we believe that the ideal investors' legal protection environment,safe and reliable financial asset,higher efficiency of financial system and lower cost of capital form the financial competitiveness and financial assets export of U.S..And the emerging market countries,such as China,form their Industrial Competitiveness in low-end manufacturing field and earn foreign exchange with lower labor cost.This international division of labor caused the current global imbalances.Facing a reality of demographic dividend disappear and poor investor protection system,our analysis shows that China should actively promote the structural reform of supply-side and transformation and upgrading of manufacturing,raise R&D spending in order to increase the value-added content of products,realize the economic growth from elements-driven,investment-driven to innovation-driven transformation.Actively develop and improve the dormestic financial market,reduce the cost of social financing and strengthen the construction of investor protection system at the same time,thus enhancing the balance of payments structure's sustainability and laying a solid foundation for capital account liberalization and the internationalization of RMB.