China's Current Account Imbalances And The Study Of The Internal And External Economic Equilibrium

The imbalance of China’s current account has been attracting lots of academic attention. The imbalance not only leads to several problems faced by China itself, but also reflects the global imbalance. Many theoretic and empirical studies try to explain this imbalance, from three perspectives:exchange regime and macro policies, the gap between saving and investment, the global division. Inspired by these previous studies, this paper selects internal economic variables such as the gap between saving and investment, the effective exchange rate of RMB, FDI and average wage, combined with external economic variables which are firstly considered and uses VAR model and OLS model. The conclusion is that the imbalance of China’s current account is mainly affected by internal economic variables compared with external economic variables such as outside savings and foreign government debts. In addition, after the empirical study this paper exploits the Swan model to analyze the China’s external and internal economic equilibrium. Then this paper provides some valuable policies and concludes that it is better for China to combine internal adjustment with external adjustment to reach the equilibrium...