What is a Trade Balance?

Balance of trade refers to the difference between a country's total exports and total imports within a certain period of time, and is used to indicate a country's foreign trade revenue and expenditure. ^[1]

Trade balance

Trade balance

Trade loss

Factors affecting a country's trade balance are:

1. Prices of domestic and foreign goods.

2,

National

Measure

Throughout

China is in the "balance of trade"

China has maintained a surplus since 1994, and the surplus is on the rise, reaching US $ 177 billion in 2006. There are internal and external reasons for this trade gap. Therefore, two different types of policies, internal and external, should be adopted.

In terms of external factors, it is mainly caused by the three major US policies toward China, namely export control policy, arms embargo policy and non-market economy status policy. China's trade surplus is actually just a surplus with the United States. China's surplus in 1995 was US $ 16.7 billion, of which the US surplus was US $ 7.49 billion, accounting for 45%; in 2000, it was US $ 29.74 billion, of which the US surplus was US $ 24.11 billion, accounting for 81%; in 2005, it was US $ 102 billion, and the The US surplus was US $ 114.17 billion, exceeding the overall surplus of US $ 12.17 billion. That is to say, in addition to maintaining a surplus with the United States, China is still in a deficit position for all other trading partners. From this we can see that the so-called solution to China's trade imbalance is mainly to solve the problem of China-US trade imbalance. This problem is caused by the above three policies implemented by the United States.

In terms of internal factors, it is mainly caused by the low value of the RMB, which is based on three low policies, namely, low labor costs, low resource costs, and low environmental costs. China's foreign trade surplus does not reflect the competitiveness of Chinese goods. If the "four lows" is changed to the "four highs" policy, China's trade surplus will disappear immediately. Of course, such a successful practice would definitely not work. There are at least two steps: first to solve the first three lows, expand domestic consumption demand, use resources scientifically and rationally, and manage the environment; then, gradually make the RMB appreciate. This will help coordinate domestic and foreign interests. The exchange rate is the price of money and the total price of all commodities. China should resolve the problems of low labor prices, low resource prices, and low environmental prices as soon as possible. Only in this way can the true value of the Renminbi be shown, so as to calm domestic and foreign disputes over the RMB exchange rate and China's trade surplus, and also be beneficial to the international trade balance.