International Economic Activities of Nations INTERNATIONAL BUSINESS CHAPTER 6 Chunni Yang TFSU

Learning Objectives The Composition of BOP Accounts How are the BOP Accounts Balanced The Mechanics of International Economic Crises

Balance of Payments Two General Principles Important Sections of the Balance of Payments Equilibrium of BOP

Balance of Payments 1. Two General Principles distinction between domestic residents and foreigners double-entry system

Balance of Payments 2. Important Sections of the Balance of Payments

Balance of Payments (2) The Capital and Financial Account 2. Important Sections of the Balance of Payments (1) The Current Account (2) The Capital and Financial Account (3) The Official Reserve Account (4) Net Errors and Omissions

Balance of Payments 2. Important Sections of the Balance of Payments (1) The Current Account Table 6-2: Global Balances on Current Account, 1997-2003 (in billions of dollars) 1997 1998 1999 2000 2001 2002 2003 Current account balance 15.8 -59.1 -101.8 -125.7 -128.9 -101.1 -37.0 Goods balance 115.8 67.9 42.1 10.3 -6.9 35.6 66.5 Credit 5563.1 5452.1 5654.9 6377.2 6115.7 6393.8 7443.5 Debit 5447.4 5384.2 5612.8 6366.9 6122.7 6358.3 7377.1 Services balance -8.5 -1.5 -13.5 -13.8 -18.4 -9.2 4.9 1363.4 1389.3 1436.0 1521.3 1527.3 1638.5 1858.8 1371.9 1390.8 1449.5 1535.1 1545.8 1647.6 1853.9 Transportation -55.0 -52.4 -50.6 -63.7 -58.7 -54.0 -66.7 Travel 25.2 27.6 28.0 31.2 28.8 30.3 34.4 Gov’t services -8.3 -17.9 -25.2 -26.1 -33.3 -33.0 Other services 35.1 31.6 27.1 43.9 37.6 47.9 70.2 Income balance -66.5 -93.5 -97.0 -78.7 -77.2 -103.9 -76.0 1105.5 1205.7 1246.3 1423.0 1328.9 1250.7 1423.5 1172.0 1299.2 1343.3 1501.7 1406.1 1354.7 1499.5 Compensation of employees 1.5 -0.5 -0.3 -3.3 -3.1 Reinvested earnings 56.7 36.1 72.0 67.1 103.1 73.3 110.2 Other direct investment① -0.2 -1.9 -37.7 -34.7 -42.4 -31.9 -50.4 Portfolio and others② -124.5 -127.2 -131.1 -109.5 -134.6 -142.2 -132.6 Current transfers balance -25.0 -32.0 -33.4 -43.5 -26.3 -23.5 -32.3 355.5 369.3 376.6 361.2 381.3 423.1 492.3 380.5 401.3 410.0 404.7 407.7 446.7 524.6 ① Refer to other direct investment income ② Refer to portfolio and other investment income Source: IMF, Balance of Payments Statistics Yearbook 2004.

Balance of Payments 2. Important Sections of the Balance of Payments (2) The Capital and Financial Account Table 6-3: Global Balances on Capital and Financial Accounts, 1997-2003 (in billions of dollars) 1997 1998 1999 2000 2001 2002 2003 Capital account balance 3.0 -15.0 -17.1 13.3 -4.9 -11.8 -15.3 Credit 51.4 45.1 48.8 70.3 53.1 58.2 55.1 Debit 48.4 60.1 65.8 56.9 58.0 70.0 70.5 Financial account balance 108.0 -0.6 46.2 236.5 177.0 189.0 44.4 Direct investment 22.5 11.7 18.8 187.6 78.6 59.6 -61.1 Abroad -443.6 -682.1 -1078.2 -1329.5 -711.2 -643.0 -615.0 In the reporting economy 466.1 693.8 1097.0 1517.1 789.9 702.6 553.9 Portfolio investment 203.4 -197.6 148.7 80.5 47.4 202.8 180.4 Assets -739.3 -1046.6 -1362.1 -1301.4 -1197.4 -674.2 -1276.2 Liabilities excluding LCFAR 942.7 849.1 1510.8 1382.0 1244.7 877.0 1456.7 Liabilities including LCFAR 963.7 928.8 1606.3 1511.0 1311.5 1049.8 1687.1 LCFAR in Portfolio -21.0 -79.7 -95.4 -129.1 -66.7 -172.8 -230.4 Financial derivatives -6.6 -13.0 14.7 -14.8 7.6 -8.8 -7.4 148.2 186.9 195.4 228.5 234.6 261.7 Liabilities -154.7 -199.8 -180.7 -243.3 -227.0 -211.6 -269.1 Other investment -65.0 210.2 -122.3 36.4 79.6 -30.3 -38.8 -1322.9 -345.5 -537.8 -1278.8 -717.1 -631.5 -1040.1 1258.0 555.7 415.5 1315.2 796.7 601.1 1001.3 1296.7 506.4 458.3 1306.5 849.0 664.6 1244.8 LCFAR in Other Investment -38.7 49.4 -42.8 8.7 -52.3 -63.5 -243.5 Reserves plus LCFAR -46.3 -12.0 -13.7 -53.1 -36.1 -34.3 -28.8 Reserves -106.0 -42.3 -151.9 -173.5 -155.1 -270.6 -502.7 LCFAR 59.8 30.3 138.3 120.4 119.0 236.2 473.9 Net errors and omissions -126.8 74.7 72.7 -124.2 -43.2 -76.2 7.9 Source: IMF, Balance of Payments Statistics Yearbook 2004.

Balance of Payments 2. Important Sections of the Balance of Payments (3) The Official Reserve Account (4) Net Errors and Omissions

Balance of Payments 3. Equilibrium of BOP Table 6-4: The Balance of Payments of China, 2004 (USD 10 000) Type of Transaction Balance Current Account 6865916 Goods and Services 4928364 Goods 5898228 Services -969863 Income and Profit -352267 Current Transfers 2289819 Capital and Finance Account 11065976 Capital Account -6935 Financial Account 11072910 Direct Investments 5313143 Chinese Direct Investments Abroad -180505 Foreign Direct Investments in China 5493648 Securities 1968987 Other Investments 3790780 Reserve Assets -20636400 Net Error and Omission 2704508 Source: The Statistics Be of P.R.C (2005), The Statistics Yearbook of China: 2004. Notes: 1. Trade data in the table are from customs statistics. 2. Credit data on direct investment in the table are from statistics and from "Approved Leasing of Land" in indirect reporting, both collected by the Ministry of Commerce, and debit data are from indirect reporting. 3. Other data in the table are from indirect reporting.

The Balance of Payments and Economic Crises The Third World Debt Crisis

The Balance of Payments and Economic Crises The Mexican Peso Crisis

The Balance of Payments and Economic Crises The Asian Financial Crisis

The Balance of Payments and Economic Crises The Asian Financial Crisis

The Balance of Payments and Economic Crises The Asian Financial Crisis

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