China’s Balance of Payments Analysis Report Essay

2197 Words Mar 6th, 2011 9 Pages
Assignment 2

China’s Balance of Payments analysis Report

Abstract

In recent years, China’s balance of payments always keeps “double favorable balance”. In 2005, China’s national economy developed quickly and stably. The exchange rat of RMB became more flexible. The current account surplus increased obviously and the capital account surplus decreased. The foreign exchange reserve still increased quickly. In 2005, Chinese government did some fiscal policy and monetary policy. Such as decreased government expense, raise the tax rate, used managed floating system, improve the foreign exchange management, enlarged the foreign exchange market. We can conclude that china’s BOP will still keep “double favorable balance” and keep
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It has arrived 853.6 billion dollars. China has become the number one which has the biggest amount of foreign exchange reserve in the world. Enough foreign exchange reserve can adjust BOP more effectively. It also can promote the national economy to develop more stably. [pic] The influence of Balance of Payment surplus After analyze the China’s BOP 2005, we can find the balance of payment “double favorable balance” can not only bring positive influence, but also can bring negative influence. 1. Positive influence: China is the biggest developing country in the world. It is just in the economy increasing quickly period. There are so many uncertain factors in the national market and international market. In the global economy, China has enough foreign exchange reserve, RMB exchange rate is stable. These are better for enhance the international repay debt ability, increase the confidence of foreign people for RMB, keep away and solve the international financial risk, protect the national economic safety. Raise the China political status and economic status. 2. Negative influence: first, although China export is increasing, but we can find most of goods are primary products or labor intensive products. These will lead so many problems, such as high pollution, high consume energy sources and create low benefit. Second, the huge amount of foreign exchange will increase the difficulty and risk of management; at last, it will lead the

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