China’s first current account deficit for 17 years ‘could signal fundamental shift’
New figures come after 25 years of China being able to take its current account surplus for granted
Beijing has registered its first quarterly current account deficit in nearly 17 years, at a time when Washington has seized on the huge bilateral trade imbalance to pressure for more Chinese imports, wider market access and a level playing field.
The State Administration of Foreign Exchange (SAFE) said on Friday that China had recorded a deficit of US$28.2 billion in its current account – which covers merchandise and service imports and exports – for the first three months of 2018, in what is the first quarterly deficit since the second quarter of 2001.
SAFE tried to play it down by saying that the rare red figure in the current account was a result of “seasonal factors”, but economists said it could signal a fundamental shift in China’s international payment position, which in turn is a result of global economic rebalance in the last decade.
Ding Shuang, the chief China economist with Standard Chartered in Hong Kong, wrote in a note that China has run a current account surplus on an annual basis in the past 25 years and “people tend to take [China’s] surplus for granted”.
The situation that people have been taking for granted for a quarter of a century was about to change, Ding noted. “A moderate shock, against the backdrop of intensifying trade frictions, can push China’s current account into deficit,” he wrote.