How do capital flows affect trade balance?

1. 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

2. DTBALR (CHN_TWN)(yr on yr difference)

3. Change in Saving and investment (yr on yr difference) Investment Saving

4. 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

5. Changes in Net Transfer (yr on yr difference) yqtf yqht

6. 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

8. Textiles Grain China – D, E, I

9. Textiles Grains NAM

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

11. Base

12. policy

13. Cum dif in quantity

14. Domestic Sales and Outputs

15. Exports

16. Export Prices