1 is not conducive to foreign economic exchanges. In countries with persistent balance of payments deficit, foreign exchange demand will increase, while insufficient foreign exchange supply will lead to an increase in foreign exchange rate, a devaluation of local currency and a decline in the international status of local currency, which may lead to short-term capital flight, thus adversely affecting its foreign economic exchanges.

2. If a country is in deficit for a long time, it will not only seriously consume a country's reserve assets and affect its financial strength, but also reduce its solvency. If it is in debt trouble, it will further affect its economic and financial strength and lose its international credibility. For example, the international debt crisis that broke out in the early 1980s was largely caused by the long-term balance of payments deficit and insolvency of debtor countries.

Sustained large-scale balance of payments surplus will also have an adverse impact on a country's economy, which is embodied in:

1. A sustained surplus will increase the foreign currency funds held by a country, or snap up its own currency in the international financial market, which will inevitably increase the demand for its own currency. Due to the role of market rules, the exchange rate of domestic currency against foreign currency will rise, which is not conducive to domestic commodity exports and has a negative impact on domestic economic growth.

2. Sustained surplus will lead to increased inflationary pressure in a country. Because if there is a surplus in international trade, it means that a large number of domestic goods are used for export, which may lead to a shortage of goods in the domestic market and bring inflationary pressure. In addition, export enterprises will sell a lot of foreign exchange in exchange for local currency to buy export products, which will increase the amount of money in the domestic market and bring inflationary pressure. If there is a surplus in the capital account and a large amount of capital flows in, the government of the country must invest its own currency to buy these foreign currencies, which will also increase the currency circulation of the country and bring inflationary pressure.

3, a country's balance of payments surplus is easy to cause international friction, which is not conducive to the development of international economic relations, because a country's balance of payments surplus also means that some other countries in the world have a balance of payments deficit because of its surplus, which affects the economic development of these countries. They ask surplus countries to adjust their domestic policies to regulate excessive surplus, which will inevitably lead to international friction. For example, the growing trade friction between Europe, America and Japan since the 1980s is due to European countries.

It can be seen that when a country's balance of payments continues to be unbalanced, whether it is a surplus or a deficit, it will bring harm to the country's economy, and the government must take appropriate adjustments to make the country's domestic economy and international economy develop healthily.

Others:

The impact of the huge balance of payments deficit;

1. Make the country's external liabilities exceed its ability to pay, and trigger a debt crisis.

2. Depleting the country's foreign exchange reserves, weakening the financial strength, depressing the local currency exchange rate, and damaging the country's international reputation.

3. Because the export income is mainly used to repay the principal and interest, it is impossible to import the means of production necessary for domestic economic development, which affects the national economy.

The influence of a large surplus in the balance of payments;

1. A large number of exports means predatory exploitation of domestic economic resources.

2. The central bank needs to spend a lot of local currency to buy foreign exchange, and the supply of base money increases. Increase the pressure of inflation. 3. Long-term surplus with major trading partners is prone to trade friction.

Tips: The above information is for reference only and does not represent any suggestions; If you have more questions, it is recommended to consult professionals in related fields.

Reply time: 2020- 12-28. Please refer to the latest business changes announced by Ping An Bank in official website.

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