Abstract
Double surplus in balance of payments is a surplus of both current account and capital and financial account during the same period. In recent years, substantial scholars have made a thorough study about this topic, but there still exists a big gap between theory and real economy. The existing literatures pay little attention to the current China’s surplus structure, especially from the perspective of FDI inflows. This paper examines the general situation of China’s double surplus in international balance of payments and analyzes its causes. Empirical research on the representative factors that influence the China’s balance of payments suggests foreign direct investment de facto contributes a large portion to the overall surplus in the balance of payments. It accordingly makes further research on the role of FDI presenting how FDI affects double surplus of China’s balance of payments and its influences on China’s economy. This paper is organized as follows: Chapter 1 is an introduction; Chapter 2 is general introduction of China’s balance of payments; Chapter 3 is the empirical analysis; Chapter 4 is the mechanism analysis of FDI; Chapter 5 is domestic influence of China’s international balance of payments surplus; Chapter 6 is about policy recommendations for China’s double surplus.
Highlights
The developing country usually has a trade deficit in current accounts and surplus in capital and financial accounts
As the profit gained from them flowing out, it is difficult for the home country to maintain equilibrium in the balance of international payments, and there may even lay the possible consequence of financial crises
foreign direct investment (FDI) has continuously flowed into China as the main source of capital surplus, how does FDI affects double surplus? The following will verify their correlation by the empirical framework
Summary
The developing country usually has a trade deficit in current accounts and surplus in capital and financial accounts. Baran (1973) [1] first put forward that foreign money comes in for the sake of extracting surplus value of the home country He believed the outflow of profit and investment revenue will aggravate the international balance of payments of the home country (usually developing countries) and make it more dependent on foreign trade. Liu (2001) [8] made a synthetic analysis from both static and dynamic effects of the influence of FDI inflow on the balance of payments of home and host country, revealing FDI is favorable to host country and unfavorable to the other He (2004) tried to explore the reason for the double surplus existing continuously for many years from perspective of foreign policy, development disparity and monetary policy. This paper is to make full use of the international balance sheet of the late two decades and try to explain the reason, changes and solution for the double surplus in China
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