China’s Balance of Payments Analysis Report Essay

China, the largest growing market in the world, currently has a policy regarding monetary regulation that allows the Yuan to “float”. This has seen the Yuan appreciate by approximately 24% over the past few years. Today, the exchange rate between the Chinese Yuan and the American Dollar is approximately 6.3 Yuan to 1 Dollar. Some argue that China should revalue the Yuan again the dollar, establishing a more fixed exchange rate. Others believe that current should allow

The China’s central bank began to roll out money policy as the People’s Bank of China sold three-month bills at a higher interest rate for the first time in 19 weeks, as reported by Bloomberg (2010). The central bank previously have loosen monetary policy as it kept its benchmark one-year lending rate at a five-year low of 5.31 percent after five reductions in the last four months of 2008 and in the first 11 months of 2009 allowed a record 9.21 trillion of new bank loans.

The government of china is very keen to encourage foreign investors, because foreign companies are regarded as relatively good corporate

In this report ,as the people working in this company, will analyse the differences between home country market and target country market, and help to choose the suitable market when company have willing to investing in a foreign country, the decision of the country which the company can invest in is China. In this report, will make analysis for Chinese market

In 1994 the Chinese government made the decision to peg the RMB to the US dollar at a rate of US$1 to RMB8.7, a year later the Renminbi appreciated 5% and was revalued to RMB8.28. This rate would remain unchanged for the next 10 years, even though the Chinese faced heavy scrutiny and pressure to revalue their currency. The Chinese exercised many policies in maintaining their exchange rate. The PBoC controlled the amount of foreign currency by forcing all exporters to immediately sell their foreign currency to designated banks. The RMB could only be traded on the China Foreign Exchange Rate

In the guideline, any investments outside China on entertainments, and raising funds aboard with minor benefits to Chinese government are not allowed. (Foreign exchange limits of each person decreased to ten thousand dollars maximum annually.) As a result, Chinese investors are forced to contribute in the field of technology, science, energy etc rather than hotels, sports teams, films etc.

Foreign direct investment has many forms. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra-company loans".

Other nations can also help with the aid of China’s New Year economy. The United States policies, through tax cuts and infrastructure spending, will help increase (proactive) fiscal stimulus and therefore benefit China in the long run. However, the financial situation is still at risk due to a sharp decline in China’s foreign exchange reserves. The stockpile decreased to $3.05 trillion which was a total loss of $69.1 billion. However, with a 6.7 percent growth over three-quarters, these problems seem to dwindle in concern.

Government Policy – Chinese government was quotas keep barriers to foreign investment to entry into the market (high barrier)

According to Scissors (2013), As predicted by some and feared by others that the tidal wave of Chinese investment around the world has not materialized. In the first half of 2013, various obstacles to overseas spending by the People’s Republic of China (PRC) kept growth moderately. The dominance of state-owned enterprises has begun to ease but then energy was again the focus, Likewise, in the first half of the year, Chinese investment in the U.S. was substantial,

The Chinese Banking Regulatory Commission seeks to open three to five new banks throughout the year. Their focus is to be responsible for their own risk as a tactic to open their institution to domestic and foreign capital for investing (CBRC). In doing so, the CBRC will need to “reduce the threshold for foreign banks to enter the banking sector” and ease currency operation requirements to make investing more ‘user-friendly’ to foreigners (CBRC).

A big chunk China's forex reserves are tied up in low yielding US treasury bonds. This had made chinesse investors nervous about the possibility of a US default. Although US securities form a large part of China's forex reserves but this

Measuring the magnitude of exchange rate pass-through for Chinese exports is all the more relevant because China’s trade imbalance with richer trading partners, notably the United States, is often perceived as exacerbated by exchange rate manipulations. Many indeed argue that an appreciation of the renminbi would help rebalance China’s trade. While the RMB was pegged to the U.S. dollar until July 2005, Tang and Zhang (2014) noted that there were significant fluctuations in real terms from an appreciation of 9% from 2000 to 2001 to a depreciation of 17% from early 2005. The extent of its trade’s response to a change in the exchange rate however depends on the magnitude of the ERPT and on the price elasticity of Chinese exports and imports.

For quite sometime the Yuan exchange rate has drawn massive criticism from developed countries, especially the US. This is because critics believe the Yuan is undervalued and therefore gives China’s exporters undue advantage. True to that, China has positioned itself as an export destination. Immediately in 1994 after it deliberately engaged in measures to undervalue its currency by adopting a pegged exchange rate regime, China transformed itself from trade deficit to trade surplus country. Even after dropping its fixed exchange rate regime in 2005, China has been accused severally of continuing to deliberately undervaluing its currency. However, an article reported on 16th November 2011 by Wall Street Journal indicated that the recent

Excluding sale of government assets, total revenue is estimated to decline to around $2,246.6 million (27% of GDP), with overall net deficit increased to $636.7 million, equivalent to 7.7 percent of GDP. Moreover, assuming 60 percent of asset sales is realized in 2014, the overall net deficit should be around 5.4 percent of GDP.