Study Of Double Surplus In China

China has maintained "double surplus" under both current account and capital and financial account since 1990s, especially since the new century, and the scale of double surplus has tended to expand. Generally speaking, if a country's current account in the international payments is unfavorable, the capital and financial account is surplus; if current account is surplus, its capital and financial account is unfavorable. Only during the period of financial crisis, countries affected by the crisis would likely to keep double surplus for some time for the purpose of foreign exchange reserves accumulation and macroeconomic situation stabilization. It is rare in the international economic history that China has kept double surplus for 15 years. At present, China's foreign exchange reserves have surpassed one trillion dollars, but the situation of double surplus is difficult to be changed in the near future. In 2006, China became the biggest country holding foreign exchange asset instead of Japan. Most of China's foreign exchange reserves are US dollars. In the future two years, US dollar is likely to significantly depreciate. Once the depreciation expected by economists from all countries happens, China asset will be subject to heavy losses. Even if the worst situation does not happen, the efficiency of central bank's monetary policy will be challenged because of the increased accumulation of foreign exchange reserves.This thesis focuses on analyzing reasons for the long-time double surplus, advantages and disadvantages of the double surplus and puts forward to some suggestions for solving the problems. In chapter I, it describes the background, definition and essence of double surplus, and puts forward to the analysis framework, and then gets the nature of double surplus and its relationship with foreign exchange reserves. In chapter II, it describes the status quo and trend of double surplus in China, including the situation of current account and capital and financial account, the trend and sustainability of double surplus and the situation of the sub terms under these two accounts. Chapter III is to analyze the reasons for long-term double surplus in China. Because Sino-US problem is a focus for many economists, this chapter also analyzes current account surplus and capital and financial account surplus between China and US respectively. Meanwhile, theoretical model is used to make policy explanation for the double surplus. In chapter IV, it describes the positive and negative effect of double surplus on China, and focuses on the problems caused by the double surplus. According to the above analysis, some constructive suggestions to solve the problems are given on the basis of learning from Japanese experiences in chapter V. Finally a conclusion will be drawn in the last chapter.