Research On China’s Management Of Imbalance Of Payments

Trade disputes between China and the United States has gone from mild to extreme,and the friction continues to heat up.Even facing the risk of anti-globalization,China has always sticked to the opening up policy.The development of the Belt and Road is open and inclusive,but there is still some discord over the Belt and Road Initiative since it was put forward.Some western media and analysts have doubts about the initiative,calling it a"Debt Trap".Therefore,research on the imbalance of payments can help clarify the reasons for imbalances in China’s balance of payments and respond to criticism at the theoretical and empirical level.Since March 2018,US President Donald Trump announce its decision to impose tariffs on goods imported from China based on the 301 Survey,and China immediately adopted countermeasure to deal with it,the main excuse is the Sino-US balance of payments issue.In theoretical research,it first analyzes the three evolution stages of the theory of balance of payments adjustment,and points out three core issues and the theoretical model framework must be grasped.Then sort out the recent advances of balance of payments adjustment,including the financial imbalance hypothesis,population structure hypothesis,precautionary saving hypothesis and valuation effects.The innovation point is constraints on external financial assets and liabilities,by adding it into the two-country DSGE Model,we explain the reason for China’s balance of payments surplus and the US deficit.Through the existence of external debt sustainability constraints,the internal motivation of capital flows between the two countries is explained base on the dynamic balance of external financial assets and liabilities:it needs to accumulate corresponding foreign exchange reserves to meet the external debt sustainability constraints when China absorbs FDI,and China’s foreign exchange reserves allow the United States to maintain a balance of payments deficit.While dealing with Sino-US trade frictions,China is also accelerating the building of the Belt and Road.Foreign direct investment is an important platform for China to implement the Belt and Road.There is still some discord over the Belt and Road.Some western media and analysts have doubts about the initiative,calling it a "Debt Trap".Therefore,it is important to study the impact of China’s foreign direct investment in Belt and Road on the international trade and balance of payments of the countries along the route.Based on a theoretical analysis and empirical research,l.fdic_China has a positive effect on netex China at the 1%level of significance.Controlling the host country’s financial development,demographic,endowment and location do not change the positive effect on netex_China.The implication is that China’s direct investment in the Belt and Road has promoted the net exports of countries along the route to China.On the other hand,China’s trade deficit can help countries along Belt and Road accumulate foreign exchange reserves,increase external financial assets,reduce their external financial debt ratio,and improve their external financial asset-liability structure.The net international investment position is also decomposed by the household sector,business sector and government sector and the adjustment effect of foreign financial net assets on the current account is studied.We commit to study the effect of external financial net assets on the current account.The empirical study results show that as China’s external financial net assets increase,it will help reduce the current account surplus as a percentage of GDP.From the sectoral perspective,the corporate sector’s external net assets do a much better job of regulating the the current account than the household and the government.The goal of the balance of payments surplus accounts for[-2%,2%]of GDP.The long-term goal is to form a balance of payments structure with current account surplus and capital financial account deficit.The adjustment target of the international investment position is to have a positive return on net foreign financial assets.This need rearrange the structure of external financial assets and liabilities,increase the proportion of equity assets and reduce the proportion of highly liquid assets.