How do capital flows affect trade balance?

• Baseline vs. Policy simulation (Quotas eliminated in 2005)

• S – I = X - M + Net Transfer

• Trade balance: X –M

DTBALR

DTBALR (CHN_TWN)(yr on yr difference)

ba

sb-b

rrr-

20

05

ba

sb-b

rrr-

20

10

ba

sb-b

rrr-

20

15

% c

hang

e

0.02

0.018

0.015

0.013

0.01

0.007

0.005

0.002

0

-0.003

-0.005

-0.008

-0.01

-0.013

-0.015

-0.018

-0.02

-0.022

-0.025

-0.027

-0.03

Change in Saving and investment (yr on yr difference)

ba

sb-b

rrr-

20

05

ba

sb-b

rrr-

20

10

ba

sb-b

rrr-

20

15

% c

hange

4.25

4

3.75

3.5

3.25

3

2.75

2.5

2.25

2

1.75

1.5

1.25

1

0.75

0.5

0.25

Investment

Saving

Change in Saving and investment (yr on yr difference)

• S – I = X - M + Net Transfer

• Initial investment inflow results in deterioration of trade balance, relative to baseline

Changes in Net Transfer (yr on yr difference)

ba

sb-b

rrr-

20

05

ba

sb-b

rrr-

20

10

ba

sb-b

rrr-

20

15

% c

hang

e

22.5

20

17.5

15

12.5

10

7.5

5

2.5

0

-2.5

-5

-7.5

-10

-12.5

-15

-17.5

yqtf

yqht

Changes in Net Transfer (yr on yr difference)

• S – I = X - M + Net Transfer

• Increased capital earnings payments to trust require subsequent improvement in trade balance, relative to balance

China All Goods

-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

2005 2010 2015

Domestic

Exports

Imports

0

10

20

30

40

50

60

70

80

90

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

East

West

North

-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

2005 2010 2015

Domestic

Exports

Imports

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

2005 2010 2015

Domestic

Exports

Imports

Textiles

Grain

China – D, E, I

-8000

-6000

-4000

-2000

0

2000

4000

6000

2005 2010 2015 Domestic

Exports

Imports

0

200

400

600

800

1000

1200

1400

2005 2010 2015

Domestic

Exports

Imports

Textiles

Grains

NAM

• How does China and Taiwan’s accession to WTO affect textile sector and structural change?

Base

share in GDP 1995 2000 2005 2010 2015

1 grains 5.04 4.98 5.25 5.16 4.80

2 othfood 12.20 12.59 12.99 13.19 13.07

3 extract 19.36 19.44 18.40 19.51 20.16

4 textiles 3.27 2.75 2.18 2.19 2.16

5 mnfcs 11.11 11.22 10.35 11.85 12.48

6 services 49.01 49.01 50.83 48.11 47.33

policy

Share in GDP 2005 2010 2015

1 grains 4.99 5.05 4.97

2 othfood 12.61 12.97 13.16

3 extract 19.41 17.89 19.10

4 textiles 2.82 2.69 2.59

5 mnfcs 11.17 9.73 11.45

6 services 49.00 51.67 48.73

Cum dif in quantity

compvalad[*CHN_TWN] 1995-00 2000-05

2006-2010

2011-2015

Base case -14.28 -29.93 -27.88 -28.68

New Base case -12.2 -28.47 -26.83 -27.94

Policy shock   -3.01 -4.12 -6.66

Domestic Sales and Outputs

basebasb-

2000basb-

2005basb-

2010basb-

2015

domestic sale 35.58 63.21 138.35 237.77

industry output 28.01 45.38 110.07 192.43

policy  

domestic sale   -12.4 -11.41 -10.94

ind output   21.79 20.86 20.28

Exports

qxs[textiles**] NA WEU Japan CHN OthNIC SEA SoAsia ROW

NAmerica -31.55 -6.13 -21.18 -87.78 -22.5 -23.65 -17.59 -10.54

WEurope -33.9 -9.35 -23.87 -68.9 -25.16 -26.29 -20.41 -13.61

Japan -35.8 -11.96 -26.1 37.41 -27.31 -28.41 -22.71 -16.11

CHN_TWN 262.13 157.42 31.05 203.67 28.75 26.64 36.8 49.02

OthNICs -33.83 -9.25 -23.78 71.88 -25.06 -26.19 -20.32 -13.51

SEA -30.26 -4.34 -19.67 -43.88 -21.01 -22.21 -16.04 -8.81

SoAsia -28.19 -1.49 -17.18 -89.3 -18.61 -19.86 -13.61 -6.09

ROW -33.35 -8.59 -23.23 -83.82 -24.54 -25.67 -19.71 -12.88

Export Prices

pxw[textiles*] b-2005 b-2010 b-2015

NAmerica -0.36 -0.17 -0.01

WEurope -0.07 0.12 0.27

Japan 0.25 0.38 0.51

CHN_TWN -6.35 -6.35 -6.52

OthNICs 0.56 0.73 0.77

SEA -0.24 -0.15 -0.08

SoAsia -0.66 -0.43 -0.28

ROW -0.15 0.04 0.22