A Study Of The Effect On Alleviating China’s External Economic Imbalances By The Establishment Of CAFTA

From the perspective of international economics, when the economy of a country is in an open environment, it should not only make the efforts to achieve its internal balance goal, as known as economic growth, full employment and price stability etc, but also to make its basic balance on external economic in the long-term. In the case of international large-scaled capital flow, the external balance of an economy is often offset and matched between the current account and the capital account. Besides, from the point of dynamic perspective, this kind of offset and matching must be scientific as well as modest. So, based on the above theory, we can find that our country started to make sustained international balance of payments "double surplus" after the1990s and this trend became more obvious after2000throughout China’s reform and opening up policy. The current account surplus and capital account surplus got together for a long time in China, and had the characteristic of severe persistent and significant scale effects. Therefore, it can be said that China’s external economy had serious imbalance.How to solve the external economic imbalances is the emphasis and difficulty of the current Chinese economy which is also the main research content in this paper. The construction of FTA which is represented by CAFTA gives us an important way to study the theory and practice. Starting from the economic geography, ASEAN’s economic development enhances the effects of complementary and convergence with China by taking advantage of their endowment advantages. Since the launch of FTA in2002, the two economies signed a number of protections of trade and investment framework agreement. Especially, since the FTA formally established in2010, the two economies strengthened regional cooperation, dissolved the external pressure and continuously strengthened cooperation in aspects of protection from external shocks. Through the various protective measures, on one hand, China can achieve greater cooperation benefits with ASEAN than with other single country; on the other hand, China can resolve the mutual interest friction and make the China’s external economy rebalance to a great extent through the implementation of strategic measures.Guided with the above content, this paper mainly includes the following contents.Firstly, this article mainly make the transformation of economic development mode in the process of reform and opening as the starting point, and put forward the article research issue, that is, China’s external economic imbalances. Next, focused on of the concept of the external economic imbalances "and" free trade zone strategy, and highlight them of the specific positioning in the Chinese model of economic development. In this article, the external economic imbalances are defined as China’s continuing, non-self-healing "double surplus","FTA Strategy" is defined as the national strategy to solve China’s external economic imbalances in the use of a free trade zone development in the region.Secondly, we conducted a systematic exposition of relevant theory and literature review. This section mainly include the elaboration and learn of the theory of global economic imbalances and the theory of the Free Trade Area, and to sort out the existing literature scholars, sum up the achievements and shortcomings of the scholars on this basis. Specifically, the theory of global economic imbalances mainly include the study of imbalance causes and solution, the theory of a free trade zone mainly include the study on the effects of trade zone and the effect towards trade and investment.Thirdly, the article presents a systematic analysis of the formation of China’s external economic imbalances. This part analyzes the theoretical basis of the formation of China’s external economic imbalances and historical context based on the review of China’s export-oriented economic development trajectory since the reform and opening up, explaining statistical indicators of external economic imbalances, and do a statistical analysis of the indicator of China’s external economic imbalances from two angle of the imbalance in the current account imbalances and financial project.The fourth part makes an analysis of the economic effects to China brought by the CAFTA construction. This section analyze the potential benefits of the CAFTA trade deficit with China and expanding investment from the perspective of the effects of trade, including trade with the degree of revealed comparative advantage, and investment effects on the basis of summarizing formation and the development of the CAFTA. And make an empirical analysis of the feasibility and effectiveness of the strategic trade deficit and expand investment in the CAFTA framework.Fifthly, this article provides recommendations to promote the further development of the CAFTA and resolve the problem of China’s external economic imbalances. Specifically, focused on the previous analysis, this section proposes solutions to promote CAFTA development and the combined experience of cooperation in the United States and ASEAN as well as the practice of RMB regionalization, to propose relevant recommendations about the promotion of CAFTA development.Lastly, this paper will make the systematic summary, point out the strategic direction of CAFTA in future, and sort out the inadequacies of the article.