Question

China had a $49.1 billion overall current account surplus in 2018. Assuming that China’s net debt forgiveness was zero in 2018 (its capital account balance was zero), by how much did Chinese purchases of financial and real assets abroad exceed foreign purchases of Chinese financial and real assets?

Instructions: Enter your answer rounded to one decimal place. If you are entering a negative number be sure to include a negative sign (-) in front of that number.

     $ _____ billion

Answer 1

Ans.

A balance of payments account is always balanced and equal to zero.

Current a/c + capital a/c = 0

So if there is surplus /deficit in current account it must be offset by purchase /sale of financial and real assets by eqaul amount of surplus and deficit.

So now we have current account surplus of $49.1 billion, so to make Balance of payments account to be zero, there should be a negative amount of capital account ie, there should be outflow in capital account.

So Chinese will purchase financial and real assets worth $ 49.1 billion.