Analysis Of China's International Balance Of Payments And Excess Liquidity Linkage Mechanism

Since 2005, the liquidity surplus of our country has attracted attention from all the parts concerned. Theoretically, Liquidity surplus will lead to economic overheating, promote the assets price going up, and finally may cause overall inflation. So if we can not solve this problem successfully, our country's economy will undergo great harms, the good economic situation will changed. The center government and the centre bank have announced that it is the main task to reduce liquidity surplus and guard against overall inflation in the near future for many times. To solve the problem of liquidity surplus, we must find out the causes for it.To find out the causes of China's liquidity surplus, the academic community has made much research, and got some meaningful opinions, they all acknowledge the contribution of the balance of international payment to the liquidity surplus. However, these opinions are partial, and didn't touch the deep-rooted mechanism between these two factors. Against to these disadvantages, this paper made deep research of the relationship between the balance of international payment and the liquidity surplus of China. This paper not only made detailed examination of the direct relationship of these two factors, namely, foreign exchange increase the base money supply under china's special system of exchange, settlement and sale, but also made detailed and deep research on the indirect relationship between them: first, the balance of international payment increase the whole national savings, thus contribute to the liquidity surplus; Second, balance of international payment interrupt the transmission of currency supply of China, thus lead to much too proactive monetary policy for a long period, finally too much liquidity was injected into the economy. This paper set up some models to analyze these mechanisms theoretically. Then use the economic data of China made some empirical work to support the theoretical analysis. Through the analysis course, our analytical framework link the external factors for liquidity surplus with the internal factors for liquidity surplus, thus made a comprehensive and deep examination and find out the apparent cause and real cause for China's liquidity surplus. At the end, this paper gives out some suggestionsThis thesis is composed of five chapters. The 1^st chapter introduces the research background, significance and its difficulties. Then briefly review the current researches on this problem. The 2^nd chapter gives out the definition of "liquidity surplus" of this thesis, index system of it, and a brief introduction of current theories on the mechanisms between balance of international payment and liquidity surplus. The 3^rd chapter analyses the mechanisms between the balance of international payment and liquidity surplus of China theoretically in details. The 4^th chapter does some empirical works to support the theoreticalanalysis. The 5^th chapter gives out some suggestions of this problem.