China’s Balance of Payments Analysis Report Essay

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Assignment 2

China’s Balance of Payments analysis Report


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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Direct investment: in 2005, direct investment surplus is 67.8 billion dollars, increased 28%. The net investment follow into China is 79.1 billion dollars, increased 44%. The net investment out follow out is 11.3 billion dollars, increase 526%. In recent years, the investment scales of foreign business are increasing stably. In 2001, the foreign direct investment was 46.8 billion dollars. In 2005, it has arrived at 85.5 billion dollars. At the same time, the form and field has changed diversification. With the China economy high speed developing and enlarging the industry field, the foreign investment will related to communication equipment, computer, bank service, insurance service, etc. so it will also increase for a long time. Securities investment: securities investment deficit is 4.9 billion. In 2004, it was surplus of 19.7 billion dollars. The net investment out follow is 26.2 billion. Security investment to external is continual increasing. There are two main reasons. First, many Chinese bank increase the foreign exchange capital because of the innovation or come into the foreign market. Second, may be the international financial market rate increase and local financial finite market, so they choose increase the foreign investment. Other investment: in 2005, other investment deficit is 4 billion dollars. In 2004, it is surplus of 27.9 billion dollars.

3. Foreign exchange reserve In 2005, Chinese reserve capital increased 207 billion
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