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?

Answer 1

In absolute terms the current account of China has fallend from $307 billion in Q2 2015 for 50$ billion in Q3 2018. The good surplus has fallend from 542 billion dollar for 397 billion dollar. There service deficit also increased from 222 billion dollar to 289 billion dollar. Wheras in the case of primary and secondary income deficits, it has been stavke. The data has shown that china is a net commodity importer. And because of that China's primary goods balance has been negative. There has been noticed a fall in the commodity price between 2014 and 2015 which has reduced the deficit from 6% to 3% of GDP. China has large manufacfuredd goods surplus. The manufactured goods surplus also fell in 2008 and 2009 due to the global crisis and the associated decrease in the global demand. But in 2010 to 2011, the surplus increased to 8% of the GDP. China's data has shown that it has been growing faster than any other countries in the world. In 2016 China's world exports decreaed along with manufactured surplus die tk the global slow down that led to the decrease in exports and imports. But in 2017, the absolute numbers of surplus has increased but not the share of GDP. This was due to the structural changes and cyclical movement of the commodity prices. As the exports fell and the problems of high production cost, low value goods etc, the production of many companies have been shifted to other Asian countries with much lesser labour cost.