IMF Working Papers

The Drivers, Implications and Outlook for China’s Shrinking Current Account Surplus

By Pragyan Deb, Albe Gjonbalaj, Swarnali A Hannan

November 8, 2019

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Pragyan Deb, Albe Gjonbalaj, and Swarnali A Hannan. The Drivers, Implications and Outlook for China’s Shrinking Current Account Surplus, (USA: International Monetary Fund, 2019) accessed June 19, 2025

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

China’s current account surplus has declined significantly from its peak in 2008 and the external position in 2018 was in line with medium-term fundamentals and desirable policies. While cyclical factors and expansionary credit and fiscal policies contributed, the trend decline has been largely structural, driven by economic rebalancing from investment to consumption, appreciation of the real effective exchange rate (REER) towards equilibrium, increase in outbound tourism, and moderation in goods surplus reflecting market saturation and China’s faster growth compared with trading partners. Policies should focus on continued rebalancing and opening up to ensure excessive surpluses do not return, and to prepare the economy and the financial system to handle more volatile capital flows. From a global perspective, the decline in China’s surplus has lowered global imbalances, but with different impact across countries. The analysis is based on data as of July 2019.

Subject: Balance of payments, Current account, Current account surpluses, Exports, Imports, International trade, Trade balance

Keywords: China, China's imports, Current account, Current account surplus, Current account surpluses, Exports, Global, Global imbalances, Global value chains, Goods surplus, Household savings, Import demand, Imports, Market share, Net creditor position, Savings-investment gap, Surplus, Trade balance, United States-China, Value-added trade balance, Vis-à-vis China, WP

Publication Details

  • Pages:

    25

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2019/244

  • Stock No:

    WPIEA2019244

  • ISBN:

    9781513516097

  • ISSN:

    1018-5941

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