Ongoing shrinking!alerting changes on China’s International Balance of Payments 2023 (01)
In 2023, China’s international balance of payments maintained the status from 2020 to 2022, that is, a condition of shrinking current account surplus, expanding non-reserve financial account deficits, slightly increasing in international reserves, and increasing net outflows on errors and omissions section (Chart 1). That is to say,Compared with 2022,China’s current account surplus has shrunk significantly in 2023, the non-reserve financial account deficit has expanded, though the net outflow of errors and omissions has reduced, the overall international reserves has decreased significantly. In 2022, China’s current account surplus reached US$401.9 billion, which was the second highest in history after 2008 (US$420.6 billion). But In the first three quarters of 2023, China’s current account surplus has been witnessed as decreasing to US$209 billion(down by 47.99%). Besides,In 2022, China’s non-reserve financial account deficit was US$211 billion, while in the first three quarters of 2023, this indicator has already reached US$185.3 billion,the full-year deficit was expected to exceed that in 2022. Meanwhile,The net outflow of errors and omissions in 2022 was US$90.6 billion, while it was US$20 billion in the first three quarters of 2023. Even worse,In 2022, China added US$100 billion in its international reserves, while in the first three quarters of 2023, it was only US$3.5 billion(3.5% the amount just 1 year ago).
It’s worth pointing out,as can be seen from chart 1, China has experienced an ongoing certain scale of capital outflows in both 2022 and the first three quarters of 2023, though absolute scale of capital outflows in the past two years was much lower than in 2015 and 2016,China’s remained net revenue was keeping on decreasing and losing up momentum especially in 2023.In 2015 and 2016, the non-reserve financial account deficit plus net outflows of errors and omissions exceeded US$600 billion. While In 2022, it was US$300 billion;then in the first three quarters of 2023, it has reached US$200 billion. Therefore, in terms of total volume, the scale of capital outflows in the past two years was not as serious as in 2015 to 2016;but can see clearly from chart 1,from 2021,China’s international reserves has dived into negative zone,and that sharp decreasing trend has not been witnessed with being sharply reversed in one way or another.
Moreover,Judging from quarterly data, in the first three quarters of 2023, China’s current account surplus demonstrated a gradually shrinking trend, reaching US$81.5, 64.7 and 62.8 billion respectively. Meanwhile,China’s non-savings financial account deficits expanded suddenly and significantly in the third quarter,showing US$50.8, US$34.1 and US$100.4 billion respectively (chart 2). Thus,The above income combination has caused the growth of China’s foreign exchange reserves to sharply reduce to negative area in the third quarter of 2023, reaching US$25.5, 16.3 and -38.2 billion respectively. What’s more,It needs paying special attention that, the non-savings financial account deficit in the third quarter of 2023 has already established itself as the second largest deficit era in history since the fourth quarter of 2016,only second to the US$103.7 billion lost in the third quarter of 2022.
Then in term of exports and imports,In 2022, China’s goods trade surplus reached a record high of US$668.6 billion; and the service trade deficit was US$92.3 billion, a new low since 2013. However,it is noted that from 2020 to 2022, China’s net overseas investment income was -120.4, -125.8 and -203.1 billion US dollars respectively, which has been historically low for three consecutive years(chart 3).
Also,In the first three quarters of 2023, China’s goods trade surplus was US$454.4 billion, even lower than 2020(533.8 billion USD); China’s services trade deficit rose to US$168.4 billion,more than that in 2020(145.3 billion USD); The primary income deficit was US$87.7 billion, with clear expanding tendency compared with that in 2020(39.1billion USD) and 2021(162 billion USD).
In 2022, it was no doubt that,the most significant change in China’s non-savings financial accounts,can be observed on the net massive proceeding outflows of securities investment section,which has reached as high as 281.1 billion U.S. dollars, which was not only a new record high in history, but also more than triple the amount in 2006 (68.4 billion U.S. dollars). In the first three quarters of 2023, although the net outflow of portfolio investment items shrank to US$98.7 billion, the net outflow of direct investment hitted a new historic peak of US$126.7 billion (even when compared with the full year of other years) (chart 4) . In fact, China only experienced such massive amount of net direct investment outflows in 2016 ($41.7 billion). Even alerting,It is worth noting that from the third quarter of 2022 to the third quarter of 2023, China has been experiencing continuous net outflows of Direct Investments for five consecutive quarters, touching a new quarterly historical peak of US$65.1 billion in Q3 2023.
Moreover,making things even worse,on account of the asset side and liability side of Foreign Direct Investment, starting from the second quarter of 2022, the scale of FDI outflows from China has continued ascending rapidly. Particularly in Q3 2023, there was a net outflow of FDI of US$11.8 billion,resulting in the first time in history that FDI had a solid net outflow of China.
