A Comparative Study And Analysis On China’s And America’s Current Account

In the tide of economic globalization, every country will inevitably deal with other countries, and face the coming problems of balance of payments. Current account is the most basic and important part of balance of payments, reflecting the actual transfer of resources between a country and other countries, it is also a key indicator to measure a country’s foreign trade ability. China is the largest developing country in the world, and the United States is the largest developed countries, and today they are the second largest trading partner for each other, their economic relationship becomes more and more closely. Over the past twenty years, China has been keep the current-account surplus, while the United States is always in the condition of current account deficit, the amount of deficit is on high-speed growth year by year. Current account imbalance between China and the United States tends to expand, and attracts the worldwide attention, which may have influence on the development of our country. Therefore, the comparative research and analysis of current account between China and the United States has important practical significance.The definition and decision theories are the starting point of this paper. In Chapter II, we firstly introduced relevant definition of the international balance of payments and the Current account, and so on. Secondly, we discuss the commonly used current account decision theory, including the "price-cash flow" mechanism, the theory of elasticity, the absorption theory, monetary theory and cross analysis. Finally, we combed and summarized some literature, get some inspiration from them. Chapter III reviews the current account balance history of China and the United States, and we get the general law of development:China’s current account surplus has a continuing trend, U.S. current account deficit may continue to expand, both China’s and the U.S.’s economy plays a important role in the world trading system.Chapter Ⅳ comparatively analyses the current-account balance between the two countries. Firstly, we find that China’s surplus amount is much smaller than America’s deficit. Secondly, merchandise trading makes the largest contribution to China’s current account balance, and the same situation to the United States. Thirdly, China’s commodity has a strong competitiveness, mainly focus on low-tech goods, and there are a lot of competitive disadvantage in our countries’services trading, the situation of the United States is just the opposite.Chapter V discusses the sustainability of China’s current-account surplus and the United States of America’s current-account deficit, confirming that the current-account surplus of China and the deficit of the United States will continue to persist in the long run. Moreover, verify a casual relationship between China’s current-account surplus and the United States of America’s current-account deficit, this means the present situation is caused by the mutual effect, not just for the unilateral reason from China.Chapter VI draws four conclusions based on the previous analysis, and find the existing problems of China’s current account, and then puts forward some policy suggestions and recommendations, specifically including domestic policy and foreign policy.