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In economics, the trade surplus refers to the fact that the total export trade of a country is greater than the total import trade in a certain period of time (such as one year, half a year, one quarter, and one month), also known as excess, indicating that the country's international trade is in a favorable position in that year. The trade deficit refers to the fact that the total value of a country's import trade is greater than the total value of exports in a certain period of time (such as a year, half a year, a quarter, and January), also known as a surplus, indicating that a country's foreign exchange reserves have decreased, and the international competitiveness of the country's commodities has weakened, reflecting that the country is in a disadvantageous position in foreign trade in that year. If the total value of exports is equal to the total value of imports, it is called a trade balance.

Since 1994, China has maintained a trade surplus in its balance of payments, with the exception of brief trade deficits in 1998, March 2010 and February 2011, which were affected by the Asian financial crisis. China's foreign exchange reserves reached $2.8 trillion in 2010 and are likely to exceed $3.2 trillion in 2011.

In November 2010, the Ministry of Commerce released the "Report on China's Foreign Trade Situation (Autumn 2010)", which pointed out that in the first three quarters of 2010, China's total import and export volume was 2,148.68 billion US dollars, an increase of 37.9% over the same period last year. Among them, exports were 1,134.64 billion US dollars, an increase of 34.0%; imports were 1,014.04 billion US dollars, an increase of 42.4 percent. Compared to the same period in 2008, exports and imports increased by 5.4 per cent and 13.5 per cent, respectively. In 2010, China's exports were 1,134.64 billion US dollars, and imports were 1,014.04 billion US dollars.

So what exactly is a trade surplus and a trade deficit?

In economics, the so-called trade surplus refers to the fact that the total export trade of a country is greater than the total import trade in a certain period of time (such as one year, half a year, one quarter, and one month), also known as excess, indicating that the country's international trade is in a favorable position in that year. The trade deficit refers to the fact that the total value of a country's import trade is greater than the total value of exports in a certain period of time (such as a year, half a year, a quarter, and January), also known as a surplus, indicating that a country's foreign exchange reserves have decreased, and the international competitiveness of the country's commodities has weakened, reflecting that the country is in a disadvantageous position in foreign trade in that year. If the total value of exports is equal to the total value of imports, it is called a trade balance.

In general, a trade surplus will provide jobs and make more people work to produce more exports, so people are mostly not opposed to this; And a huge trade deficit can seriously affect a country's national economy, so all countries** try to avoid this happening. The trade surplus will also increase foreign exchange reserves, enhance the comprehensive national strength, help maintain international reputation, improve the ability of foreign financing and the ability to introduce foreign capital; A large trade deficit would indicate a decrease in the country's foreign exchange reserves, weak international competitiveness of the country's goods, and the country's disadvantage in foreign trade that year. The trade surplus strengthens the country's ability to resist the risks of economic globalization and contributes to the country's economic security. A large trade deficit weakens a country's ability to resist risk.

It is a good thing that our country has maintained a trade surplus in its balance of payments and has huge foreign exchange reserves. But everything has to be seen in two parts. A huge trade surplus will also bring me more and more trade disputes; Although the trade surplus has increased foreign exchange reserves, from the perspective of maximizing the utility of resources, the resources are underutilized. The persistently high surplus leads to the expectation of RMB appreciation, which in turn leads to an increase in net capital inflows, which in turn leads to the pressure of RMB appreciation. A large current-account surplus will translate into pressure on a large amount of money, which will become an important factor in the rise of inflation.

Conversely, the results of the trade deficit are not without merit. An appropriate trade deficit is also conducive to alleviating short-term trade disputes and contributing to long-term stable trade growth. The deficit is actually equivalent to investment in the purchase of productive equipment, as long as the investment project is properly selected, it can not only supplement some domestic shortage of raw materials, but also quickly increase production capacity, increase employment and increase the total economic output; The deficit can reduce the expectation of RMB appreciation and slow down the rate of net capital inflows; The short-term trade deficit will help alleviate the pressure of inflation in China and increase the operational space of China's monetary policy. So, how to make effective use of China's huge foreign exchange reserves?

China can start from the following aspects: First, change the mode of foreign trade growth. In the development of China's foreign trade, we will increase R&D investment, improve the ability of independent innovation, and gradually improve the technical content of products. At the same time, we will vigorously develop trade in services, increase the added value of exports of trade in goods, increase the added value of export products, gradually increase the proportion of trade in services in import and export trade, promote the transformation and upgrading of processing trade, and achieve balanced development of foreign trade; Second, we should pay attention to the mode of domestic demand-oriented economic development. At present, China should seize the opportunity of "turning crisis into opportunity" in the international financial crisis, stimulate consumption, stimulate production, improve the income level of middle and low groups, and enhance residents' consumption capacity, and at the same time gradually improve China's social security system, promote reforms in the fields of medical care, housing and education, improve the welfare and quality of low-income workers, expand effective demand, and improve the social security system can reduce people's precautionary savings and expand residents' income. If these strategies are effectively implemented, China's long-term trade surplus structure will gradually change to a structure of basic balance of payments, and foreign exchange reserves will also be effectively utilized.

In short, in international trade, the bigger the surplus, the better, and the more foreign exchange reserves, the better, and a moderate trade deficit is conducive to economic development. In international trade, China should not only pursue a surplus, but should strive for a basic balance in trade, so that we can achieve steady and relatively rapid economic development.