On the Exploding EU Trade Deficit with China

摘要

The sharply rising EU trade deficit with China and the dual surplus on Balance of Payment (BOP) in China have been drawing attention both at home and abroad, with most of the papers on this issue regarding it as the unbalance that should be adjusted by such measures as revaluation of the RMB. In this paper, the processing trade witnesses a higher surplus of percentage on current account (including the EU trade and China trade), while the surplus on capital and financial account witnesses a net inflow in FDI, a debit balance on both of the other investment and the portfolio investment. The conclusion is that it is only a result of one phase from the processing of reallocation of capital around the world, so it's unnecessary to balance the surplus by revaluation the RMB. This study argues that we can reform the regulation about foreign exchange. That is to change the Forex Purchase and Sales policy into Forex Deposition policy,and then use the solution of ECNs for central bank and M-Commerce for the commercial banks, corporations and private enterprises can form a real floating Forex market.