A Research On The Change Of Current Account Balance Of China

China joined WTO by the end of2001,from when Chinese current account balance came out with huge surplus and reached maximum value in2008. As the globalization process becomes deeper and the closer relationship between China and other countries, nowadays China has become the top one country with largest foreign economy in the world. Such development rises international discussion. In one hand, the sustaining huge surplus of current account facilitated the economy development, while in another hand, issues are brought about to our macro economy. Chinese government and related authorities had paid much attention to this issue and carried out measures to adjust. Also our scholars did much research in this field to put forward valuable suggestions. Therefore, we had to adjust the structure of economy more positively with developing safe and efficient foreign economy, including improving foreign exchange management and innovation to lead our economy recovering to its balance. Under such circumstance we researched the change of China’s current account balance. We aimed to provide suggestions not only in line with economic theory, but also in accordance with the reality and could help to make actual policyMost research in this field based on the imbalance of current account with discussing on its background and reasons, then analyzing the degree of such imbalance through empirical method. Although this paper discussed the current account balance, we had no attention to use imbalance to cover the whole paper. We followed the logic that by analyzing the data of our current account, studied the determinants、the law of change and sustainability. This paper chooses particular perspective to analyze the relationship、extent of inter activating and transmission channel between current account balance and other macroeconomic variables. In order to achieve this goal, we should study the subject from following aspects: First of all, we summarize the characteristic of China’s current account by analyzing data from Balance of China’s International Payment which is published by SAFE, by such works we are expected to string all factors such as times policy together into one line. During our study process, we have to set basis by using classical international finance theory in this field, and combine the practice of China’s current account balance. Through deep research into the change of related data, we are trying to seek for the reasons or laws casuing such change. Only had realized the particular changing process taking place in China’s current account balance, could we capture such characteristic in the following empirical research and provide reasonable explanation to such issue. Therefore, the purpose of this part lies in knowing the changing process of China’s current account balance, exploring the characteristic of such change and capturing the detail in the change.Second, we will further study the change of China’s current account balance by applying related economic theories and models. Although the data of China’s current account balance have come out by accounting method, the reasons causing such change still attracts our attention and worthy for further discussing. These economic theories and models are excellent start point to analyze the change. Through applying these method, not only could we figure out the effecting factors of China’s current account balance, but also could predict the extent and direction of such effecting.At last, we applied modern econometrics method to study the effecting factors of China’s current account balance and long-run sustainability problem empirically. On the basis of economic theory, we construct mathematic model and empirical model. Combing the data from China’s macroeconomic variables, we analyze the effecting factors s structural change and sustainability of China’s current account balance, while we also compare the results and provide fully explanation to draw meaningful conclusions.Main economic theory that applied in this paper is The Intertemporal Approach to the Current Account and Two-Gap Model. The main econometric methods adopting here includes VAR model, impacting respond method, Granger causing method, FMOLS method, break-point test and Multivate Threshold Regression Model.We arrange our chapters according to above thinking. Chapter one is the introduction part which states the background and reason why we choose the change of China’s.current account balance as our subject. Still we introduce the main research contents and structure arrangement of this paper, and propose the innovation part and those details where we could have omitted or have faults in it.In chapter two we mainly comment those researches in this field by categories. By studying the existing research done by our predecessors, we could re-study their economic method and thoughts and decide how to apply the advantage in our paper, still we could review their study and realize the shortcoming clearly. It is expected that through such work, a basic theoretical and empirical framework could be built for our paper.In chapter three we summarize the characteristic of China’s current account by analyzing data from Balance of China’s International Payment which is published by SAFE, by such works we are expected to string all factors such as time、policy together into one line. In the meantime, we sum up the changing reasons and patterns by combining the policy background and economic environment during that period.Then a theoretical model has built in chapter four according to latest research findings and economic theory. Moreover, we decompose the effecting factors through resolving the traditional model. Next step we predict the extent and direction of such effecting on the basis of economic theory and mainstream empirical results. At last a final model which could be empirical is made.Chapter5is an empirical chapter where we have done what we described in above chapters. In the beginning we analyze the time-series data of China’s current account balance, and then apply various econometric method to study the models that are set before. We also explain the empirical results with economic meaning to fully illustrate the extent and direction of the effects to China’s current account balance.In this chapter we extend the topic logically to discuss the issue concerning the sustainability of China’s current account balance. Except for drawing the popular identification standard from latest research, we are fully aware of that there is a structure change taken place in the middle of our time-series data, therefore the corresponding measurement is made to fix such problem.Chapter7is the final chapter, we compare and conclude the previous results from both theory and empirical study, also we comment the relationship among the effecting factors, structure change and sustainability. Finally related suggestions concerning our macroeconomic policy are proposed.The innovation part of this paper including several aspects:First of all, we have linked the Intertemporal Approach and Two-Gap Model. Second, we decompose Two-Gap model twice to get the determinants. Third, we apply the empirical method to capture the structural break. The results show that all factors have different effects in two regimes. Also these two parts are innovation part of the whole paper. At last, we use different ways to assess the sustainability of China’s current account balance. Still, we have faults existing in this paper, such as lack of deeper discussion on Intertemporal Approach with more sophisticated method. Also the sample volume is not large enough could be another part to be improved in the future.