China's Trade Surplus:An Investment and Consumption Perspective

Persistent and excessive trade surplus is not necessarily conducive to a country's economic development.Amongst fierce international competition,we should correctly assess the situation by analyzing the real reasons for trade surplus and properly judging its economic consequences.In line with the Keynesian national income equation,this paper presents an investment and consumption perspective of China's trade surplus.It is concluded that sustained high investment and low consumption are the fundamental reason.Further analysis indicates that irrational disparities in income,via internal demand,also indirectly contribute to trade surplus.