Question

Analyze the time-series data of Balance of Payment of China (Since 2010). Discuss the trend of changes in current, capital and financial accounts. Based on your observation, with other external economic information, what shall the policymakers do in responding to these changes? 800 words use economic concepts to develop your arguments with clear organization, supported with evidence and statistics.

Answer 1

sol:

The balance of payments is the of all citizens of a economies foreign trade and monetary transactions made record.
The balance of payments of a nation shows if it saves enough to pay for its imports. It also shows whether enough economic activity is produced by the nation to pay for its growth. The BOP is booked for a quarter or a year.

In China International trade and financial financing are state monopolies, with policies and transactions being overseen by the People's Bank of China. The PBC sets exchange rates for foreign currencies between its different functions.

In a state of economic isolation, there is no nation today that remains. All the different aspects of the economy of a nation, such as its level of industrial development, the growth of its income and jobs, its people's living standards and the like, are closely related to the economies of the numerous other nations that have been involved in trade ties with that country.

The balance of payments acts as a significant role in a country's economic development. Large payment balances put the foreign currency under upward pressure and the currency of own country under downward pressure. As a result, the value of the local currency has depreciated and the foreign exchange rate has appreciated.

This local currency devaluation has a positive effect on exports and a negative impact on imports. It is beneficial in the sense that it raises exports because local goods are available in foreign currency at a lower price.

In Sept 2020, China's trade balance reported a surplus of USD 37.0 bn, compared to a surplus of USD 58.9 bn in the last month.

In Aug 2020, Chinese total exports reached 235.3 bn USD, a rise of 2.8 percent year on year. In Sept 2020, total imports reported 202.8 USD bn, an increase of 3.9 percent year on year.

During few past decades, China has been doing very well. In 2005, its GDP surpassed USD 2 trillion, and in the first years of the 21st century, The growth rate of GDP was more than eight percent.

A large portion of China's GDP comes from international trade, so the economy 's performance is largely dependent on the world economy. The slump in world imports reflects its impact on China 's exports and and its nation's.

After the United States and Germany, China became the third largest trading nation in 2005 and its contribution to the growth of world merchandise trade over the period 1996-2006 was 20 percent.

Because of FDI attractiveness, a high domestic saving rate, productivity improvements powered by reduced internal and external trade barriers, and a substantial labour surplus (OECD 2005), By the beginning of the next decade, China is predicted to become the world's largest exporter.

Overall, China's exports of goods account for nearly 90 percent of its overall exports, which is slightly higher at just over 80 percent than the world average. The exports of its services are Just marginally less than that 10 percent compared to a 20 percent global average.

China's exports of services are still need to progress comparatively and its penetration into the global economy is driven largely by trade in products.