Research On China's International Balance Of Payments Adjustment

In recent years,"Double Favorable Balance"has been the style of the balance of payments in China, and the foreign exchange reserve also has been increasing very quickly. In order to find solutions to the problem mentioned above, firstly, this dissertation analyzes reasons that cause"Double Favorable Balance". The result of the analysis shows that there are two main reasons which cause the style of the balance of payments. On one hand, it is because of the economic structure, the demand of consumption and investment. On the other hand, it is because of the policies about import and export, capital control, and different criteria for foreign and domestic enterprises. Secondly, an empirical model is established based on the data from China Balance of Payments. Thirdly, the empirical model of balance of payments is added to China_QEM by implementing the part of finance. Finally, the revised China_QEM is used to simulate and analyze the effects of different scenarios on balance of payments. The scenarios show that: (1) A slower growing speed of the World Export Price will be clearly effective to mortify the external imbalance. (2) It is hardly seen significant effects on balance of payments when interest rate is adjusted. (3) To accelerate the appreciation of RMB will result in increases of the important variables of the balance of payments comparing with the base line. So it is not beneficial to mortify the external imbalance.