The Sustainability of Trade Balances in China

This study uses nonstationary time series approach to test the sustainability of the current account deficits in China over the period from 1982 to 2009. Our empirical results suggest that, despite the cointegrating relationship between imports and exports in China, the intertemporal external constraints may be violated. Thus, the trade balance surplus experienced over the past several years cannot be sustainable in the future. It is therefore necessary to ensure that an effective policy for controlling changes in trade accounts is established.