International Finance

Author: Chief Editor: Yu Lixin et al.
Publisher:
Publish Date: 1999-02-01
Features:
Fragment: Chapter International Balance of Payments
International Balance of Payments is an important component of international finance. As the starting point and foundation for studying and mastering the discipline of international finance, the international balance of payments holds significant importance.
Section Analysis of International Balance of Payments and Balance of Payments Statement
I. Basic Connotation of International Balance of Payments
In the process of international economic interactions, economic, trade, political, cultural, and technological exchanges between countries typically involve mutual creditor-debtor relationships and changes in international monetary transactions. For example, trade in import and export commodities, movement of international capital, provision of mutual services and technology, transfer of intellectual property rights, as well as international aid and gifts, all give rise to international balance of payments issues due to monetary exchange relationships between countries. Therefore, the connotation of international balance of payments has evolved along with the development of the world's commodity economy and the continuous expansion of the content of international economic interactions.
The international balance of payments refers to the total records of all economic transactions between a country and other countries within a certain period (usually one year), including trade and non-trade payments, transfers, creditor or debtor relationships, and changes in the ownership of other financial assets. This is the broad definition of the international balance of payments, while defining it as the sum of foreign exchange transactions represents a narrow definition. Additionally, when using the term "international balance of payments," it is important to distinguish between three levels: international balance of payments flows, international balance of payments statistics, and the status of the international balance of payments.
(1) International Balance of Payments Flows
It refers to the monetary value of all economic transactions between residents and non-residents of a country within a specific period. The term "resident" refers to economic entities that have resided in a country (or region) for more than one year. Otherwise, such entities are considered non-residents of that country (or region). Both residents and non-residents are economic concepts, differing from the legal concept of "citizens." They both include four categories of entities: government, enterprises, individuals, and non-profit organizations. For instance, the subsidiary of General Electric Company in Singapore is a resident of Singapore but a non-resident of the United States. Business transactions between the subsidiary and the parent company are part of the international balance of payments flows of both Singapore and the United States.
An economic transaction refers to the transfer of economic value from one economic entity to another. It can be divided into five types:
(1) Exchange between financial assets and goods and services;
(2) Exchange between goods and goods or between goods and services;
(3) Exchange between financial assets;
(4) Unilateral transfer of goods and services;
(5) Unilateral transfer of financial assets.
If an economic transaction occurs between residents and non-residents, it is considered an international economic transaction. For example, paying foreign exchange in international trade to obtain foreign goods and services falls under the category of international economic transactions. Bilateral barter trade falls under the second type of international economic transaction. Financing through international bonds and stocks is an example of the third type of international economic transaction. Meanwhile, international physical donations and international aid funds are, respectively, examples of the fourth and fifth types of international economic transactions.
As a concept for measuring the value of a country's international economic transactions, the international balance of payments flow is capable of fully and accurately reflecting the content of a country's international economic transactions and has been widely adopted by countries worldwide. Under open economic conditions, the international balance of payments flow, as an important macroeconomic variable, is closely linked to other macroeconomic variables, forming the foundation of international balance of payments analysis.
Postscript:
The book "International Finance" was organized and compiled based on the teaching requirements of the part-time master's program at the Graduate School of the Chinese Academy of Social Sciences. Originally intended as a foundational theoretical textbook for the International Trade program, it was edited and compiled under the leadership of Yu Lixin, a (Associate Research Fellow and Master's Supervisor) at the Foreign Trade and Economic Research Department of the Institute of Finance and Trade Economics, Chinese Academy of Social Sciences, and Secretary-General of the Center for International Trade and Finance under the Institute of World Economics and Politics, Chinese Academy of Social Sciences.
Since its internal trial publication in March 1997, "International Finance" has been used as a textbook for the part-time master's program at the Graduate School of the Chinese Academy of Social Sciences. Not only have graduate students from the International Trade, Monetary Banking, and Finance programs of the Finance and Trade Economics Department studied it as a foundational theoretical course, but some students from other programs, such as Enterprise Management in the Industrial Economics Department and Urban Economics in the Urban Economics Department, have also used it as a selective course textbook.
After two years of teaching practice and extensive feedback from experts and readers, we made necessary revisions and additions before formally publishing it with Economic Management Press, while maintaining the overall framework and main content of the book. We sincerely hope that our academic predecessors, colleagues, and readers will continue to provide valuable suggestions so that we can further improve the book in future editions.
Author
February 1999, Beijing