China: Q2’s current account returns to a small surplus – Nomura

China’s current account (CA) returned to a small surplus (USD5.8bn, or 0.2% of GDP) in Q2 after the first quarterly deficit (a downwardly revised -USD34.1bn, -1.1% of GDP) in Q1 2018 since 2001, notes the research team at Nomura.

Key Quotes

“As a result, the CA totalled -USD28.3bn in H1 this year, versus USD68.3bn for the same period of 2017.”

“The small CA surplus in Q2 was driven purely by the goods trade components, the surplus of which doubled to USD104.2bn from USD51.7bn in Q1. Year-on-year export growth was slower than import growth in Q2, but the value of exports was much bigger than that of imports and has helped to widen the trade surplus.”

“Q2 data support our view that Q1’s deficit was partly seasonal, and we expect the CA to remain in surplus in 2018 (Nomura’s forecast: 0.2% of GDP). That said, the goods trade surplus is set to narrow, while the services trade deficit is set to widen, so we forecast the CA to return to deficits in 2019 (-0.4%) and 2020 (-0.8%).”