Research Of Double Surplus's Effects Of Economy Of China

This paper aims to explain that the reason for china's double surplus is resulted from special phase and economic structure during the process of development of china's economy. Double surplus does play a positive role in china's development, but it requires export of massive resources. This is not rational enough for china as a developing country because it will pose hindrance to china's sustainable development.There are some negative effects of continuing double surplus for china's economy: it weakens the independence of china's monetary policy, resulting in liquidity surplus, further more interfering the development of national industry, meanwhile it creates the expectation for RMB's appreciation which contributes to the massive inflow of hot money and increases the difficulty and opportunity cost of management of foreign exchange reserve. This paper discussed every issue by quantitative analyzing with tables and pictures, it is mainly about the liquidity surplus and hot money under the cover of double surplus: We attributed the china's liquidity surplus to internal reasons and external reasons, our conclusion is that the main reason for china's liquidity surplus is double surplus caused by surge in foreign reserve; We considered hot money as a part of surplus to analyze and found that hot money under cover double surplus chased profit in china's real estate's market, stock market ,interest market and foreign exchange market whose effects are now emerging.So cautious consideration and treatment is needed on this issue. This paper gives the following solutions to the problems mentioned above: firstly, we should enrich tools of investment and loosen the restrictions on financing; secondly, Together with establishing scientific view of development and transferring our ways for economic growth ,we should adjust our foreign economy policies and implement strategy of trade balance; Thirdly, we should change the function of our government and increase the financial expenditure; besides, we should strengthen the coordination of monetary policies and properly guide the flow of foreign capital; lastly, we should increase the foreign direct investment actively and rise the return on investment of foreign exchange reserve, meanwhile, we should strengthen the coordination of policies between countries to drive the appreciation of RMB step by step.