Study On The Sustainability Of China's Trade Surplus

China's trade surplus has been in a steady scale since1994. But it raises sharply when comes into 2004. In the longrun, trade has been a major engine for China's economy,but it's sideffects are emerging. Such as the imbalance of internal and external macroeconomy, the pricking up trade frictions and overwhelming pressure on RMB's appriciation. So it is of great importance to explore the causes and mechanisms of China's persistance trade surplus.The profound reason lies in the imflexibility of China's factor prices. The causes for that are complex, besids the rigidity of factor prices , the mechanisms also attibutes to it. Despite researches on the subject are luxuriant, they lack of seeing into the subject in question from factor price insight,which couldn't explain the mechanism of wheather China's persistance trade surplus is sustainnable from the root.Under the abovemetioned background, the essay combines the recent researches,general condition of China's trade surplus and analysis the underestimation of China's factor prices, set up an integrate micro-mechanism between China's trade surplus and the underestimation of China's factor prices , and by empirical study to open out how the mechanisms works: because of the underestimation of China's factor prices, China's compared advatage is locked in lower lever, factor intensive processing trade is strengthened. Although the situation won't be longlasting ,it also couldn't be work out in an eye's blink.Both market and policy needs some time to founction. Therefore, China's trade surplus is not sustainable,with the fast marketlize development of China's factor prices ,trasfermation of processing trade ,it will gradually fall into the longrun equilibrium.To facilitating China's trade surplus'fall into its longrun equilibrium,Chinese government need to do something: reform China's factor prices markets , ensure real wages to increase at the speed of factor productivities rise, boost trade equilibrium, enforce enterprices to optimize their factor uses and transform the way of producting as well as trade.