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Current-account surplus will shrink

By Martin Feldstein | 皇冠体育app Daily | Updated: 2011-01-31 07:53

皇冠体育app's current-account surplus - the combination of its trade surplus and its net income from foreign investments - is the largest in the world. With a trade surplus of $190 billion and the income from its nearly $3 trillion portfolio of foreign assets, 皇冠体育app's external surplus stands at $316 billion, or 6.1 percent of annual GDP.

Because the current-account surplus is denominated in foreign currencies, 皇冠体育app must use these funds to invest abroad, primarily by purchasing government bonds issued by the United States and European countries. As a result, interest rates in those countries are lower than they would otherwise be.

However, that may all be about to change, as the policies that 皇冠体育app will adopt as part of its new five-year plan will shrink its trade and current-account surpluses.

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