A Comparative Research And Empirical Analysis On Imbalances Of China's And India's Current Account

China and India had been the same as center countries of the agricultural world. They all have numerous populations. Their economy had experienced the process from decline to regeneration in the modern times. They all carried out the economic reforms in the 20th century. They are two of the world's fastest growing countries. Their conditions have much in common. However,their current account are very different. China is mainly in surplus, while India in deficit . By comparison, we can get some inspirations to improve the current account. Therefore, this research has a strong practical significance.About the research method, this paper used literature research, theoretical research combined with empirical research, quantitative analysis combined with qualitative analysis. In this paper, on the basis of existing researchs of current account ,and the macroeconomic, microeconomic analysis of China and India ,we found out some factors which caused the differences of current account. These factors were exchange rates, economic growth rates, fiscal revenue and expenditure, financial system, age structure of population and the extent of trade openness. I chosed the cash surplus or deficit percentage of GDP as the alternative variable of fiscal revenue and expenditure, the domestic credit provided by banking sector percentage of GDP as the alternative variable of financial system, the dependency rate of population as the alternative variable of age structure of population, the total amount of export and import percentage of GDP as the alternative variable of the extent of trade openness.Then we compared the two countries's current account from these areas. Besides, I took a analysis of the OECD country's trade structure, age structure of population, financial system and fiscal balances of 2008. After that we found out that these factors play an important role in causing the differences of their current account. In this paper,we pay attention to the structural analysis in the process of comparative studying. It analyzed the different influences of goods and services trade to the current account. Then we can find out that the goods trade have a close relationship with current account.But, the relationship between service trade and current account is not obvious. In fact, people in different ages have different habits in saving, consumption and investment. So the current account is affected by the age structure of population.On the empirical studying, I used the Cointegration test and Granger causality test of Eviews5.0. The datas were from 1982 to 2008. The results showed that: in our country, the factors and current account have a long-term equilibrium relationship. The dependency rate of population, economic growth rate and financial system, having a negative correlation to the current account; the extent of trade openness is positively correlated with the current account; The relationship between current account and exchange rate is weak. According to the Granger causality test, the current account is effected by the dependency rate of population , economic growth rate, financial system and extent of trade openness. India's dependency rate of population, financial system and extent of trade openness have a positively correlation to the current account; economic growth rate and exchange rate have a negatively correlation to the current account, but the correlation is weak. According to the Granger causality test, the current account is effected by the exchange rate.Therefore, in order to improve the long-term imbalance of current account, we must reform the age structure of population, financial system and economic development policy. So we can achieve a better balance of internal and external economic, making China's economy development sustained, stable and healthy.