Why Balance of Payments? What is the impact of a long term surplus or deficit on the economy?

One of the main objectives of macroeconomic regulation is to maintain the balance of payments. The balance of payments is a systematic record of all economic transactions between a country or region and other countries or regions in a certain period of time. The balance of payments mainly includes ** items and capital accounts.

Surpluses and deficits in the balance of payments and capital accounts will have a negative impact on a country's domestic economic operation and international economic relations. A long-term balance of payments surplus will put the currency under international pressure to appreciate, produce a series of frictions and even retaliation, and even affect normal state relations At the same time, it will have a negative impact on the balance of domestic aggregate social supply and aggregate demand Long-term international deficit will affect currency stability, increase inflation and unemployment pressure, and at the same time will consume a large amount of international reserves, reduce domestic and international confidence in the domestic economy, capital flight, deterioration of the investment environment, and weaken the country's ability to resist economic risks. There was even a "crisis".

Maintaining the balance of payments is one of the objectives of the managers of various countries, and long-term surpluses or deficits are not conducive to the equilibrium of the economy and the allocation of resources.

Possible negative effects of deficits:

1. Consume foreign exchange reserves, weaken its ability to pay abroad, depreciate the local currency, decline its international status, and short-term capital flight, affecting its international credibility.

2. Domestic monetary tightening, rising interest rates, increasing unemployment, declining national income, and declining economic growth.

Possible negative effects of the surplus:

1. It will increase the amount of the national currency, thereby aggravating inflation.

2. Generally, the exchange rate of the national currency will rise, which is not conducive to the development of its exports, and has a negative impact on the growth of the national economy.

3. The surplus of payments formed by excessive exports means that the domestic resources available for use are reduced, which is not conducive to the sustained and healthy development of the domestic economy.

4. It will exacerbate international frictions, because a country's balance of payments surplus means that the country concerned has a deficit in the balance of payments.

1) forcing the country to compress imports, affecting economic development (2) The withdrawal of the local currency will tighten the domestic currency, prompting the level of interest rates to rise, which will lead to a decline in industrial investment and affect economic growth. A slowdown in economic growth will in turn lead to an increase in unemployment and a decline in national income. (3) The intervention of the monetary authorities in the foreign exchange market will reduce the country's foreign exchange reserves, and if the country relies on borrowing to make up for the deficit, it is easy to plunge the country into a debt crisis.

Measures: foreign exchange buffer policy, fiscal and monetary policy, exchange rate policy, direct control policy and international coordination, etc. Article 101 of the Civil Procedure Law of the People's Republic of China stipulates that if an interested party fails to immediately apply for preservation due to the urgency of the situation, its legitimate rights and interests will be irreparably harmed, it may apply to the people's court at the place where the property to be preserved, the domicile of the respondent, or the people's court with jurisdiction over the case is to take preservation measures before initiating a lawsuit or applying for arbitration.

The applicant shall provide a guarantee, and if the applicant does not provide a guarantee, a ruling shall be made to reject the application. After the people's court accepts the application, it must make a ruling within 48 hours; Where a ruling is made to employ preservation measures, enforcement shall begin immediately. Where the applicant does not initiate litigation or apply for arbitration in accordance with law within 30 days after the people's court adopts the preservation measures, the people's court shall lift the preservation.

You should be talking about China's balance of payments, right?

The balance of payments surplus means that a country's income exceeds its output in the balance of payments, and the balance of payments is generally settled in US dollars, and this settlement is carried out between banks. When the economy is in recession, the U.S. Congress reduces the value of the dollar through quantitative easing, which is actually a kind of protection. At the same time, in the context of the international monetary system, which is based on the US dollar, the exchange rate of the renminbi against the US dollar will rise, and the local currency will be too strong, which will trigger large-scale arbitrage, arbitrage and foreign exchange speculation.

In China, it is manifested in the appreciation of the renminbi, in fact, it is arbitrage at the same time as China's foreign exchange arbitrage. Second, it leads to inflation, taking China as an example, China is imported inflation, in March, a total of US Treasury bonds trillions of dollars, the surplus will increase the supply of foreign exchange and the demand for the local currency, the monetary authorities have to buy a large amount of foreign exchange in the foreign exchange market to intervene. In both cases, the amount of money in the country will be forced to expand, and prices will be **, which will trigger inflation.

The best way to control inflation in our country is to maintain a certain balance of foreign exchange and increase imports while increasing exports, not by reducing exports. Of course, it will also affect imports and exports, making them unbalanced, thus causing ** friction and affecting international economic relations.

When the economy is in high swing, there is a deficit, just think the other way around!

It's all possible. During the recession, domestic aggregate demand declines, and import demand also declines, and the balance of payments will be in surplus; However, if the country's consumption of imported products is relatively stable, the economy is in recession, the employment rate is declining, the output is declining, exports are less, and imports are relatively stable, there will be a deficit in the balance of payments.

From a dynamic point of view, according to the balance of payments equation analysis, the more a country's economy develops, the more its national income increases, and the greater the demand for imports, it will lead to a current account deficit. In recessions, imports decrease and savings increase.

The most fundamental reason for the surplus deficit is the relationship between exports and imports, China is an exporting country, and exports are far greater than imports (because of cheap labor), so it has been in surplus.

When the economy is in a recession, consumption power becomes weaker, and if exports cannot be sold, there is a risk of a deficit.

There are seven causes of the imbalance in the balance of payments, and what you are asking about is the first of them, which is cyclical imbalances. The economic recovery is mainly due to the fact that domestic investment and consumption demand are strong in the case of better economic development, which in turn leads to an increase in imports, and in case of economic downturn, domestic investment and demand will shrink, which in turn leads to a decrease in import demand.

However, there is not a single reason for the imbalance in the balance of payments, in addition, there are structural, competitive and other reasons that will lead to the imbalance in the balance of payments.

In addition, the reasons and manifestations of the balance of payments between developed and developing countries are also different, the main reason for developed countries is the economic cycle, that is, the question asked by the subject belongs to the economic cycle, which is more in line with the analysis of developed countries, while the main reason for developing countries is the economic structure, that is, industrial structure, product competitiveness, etc., so what the subject asks is not very suitable for our country, let alone look at this one reason to analyze our country.