Question

Current account and financial/capital account balances are supposed to net out as per theory. How did China manage to consistently maintain a positive current and financial/capital account surplus through the years?

Answer 1

China have cheaper export and less importvif goods and service and also get good amount income from a broad thus they have tarde surplus of current account . They under valued their currency in comaore to dollar that why their export are cheaper and import are discouraging which promote them to make more and more cheaper products as well export of them.

China capital account is surplus they get huge amount of foreign investment through fdi and fii. Which make their capital account surplus.