China: First quarterly current account deficit since 2001 - Nomura

China’s current account (CA) recorded the second quarterly deficit on record in Q1 2018 (the first was an USD0.9bn deficit in Q2 2001; State Administration of Foreign Exchange data since 1998), points out the research team at Nomura.

Key Quotes

“The CA balance declined to -USD28.2bn (-RMB179.4bn; -0.9% of GDP) in Q1, far below Q1 and Q4 2017 levels.”

“The CA deficit was led mainly by goods trade components, the surplus of which narrowed rapidly by 35.1% y-o-y to USD53.4bn in Q1 2018, as import growth (18.9% y-o-y in USD terms) well outpaced export growth (14.1%).”

“A widening services deficit also contributed, albeit to a lesser degree, expanding by 20.3% y-o-y in Q1 2018 to a record high of USD76.2bn.”

“The quarterly CA deficit was partly seasonal, as the CA surplus usually tends to be the lowest in Q1. We believe the CA surplus will return and then narrow over the rest of this year.”

“We have trimmed our CA forecast to 0.7% and 0.5% of GDP for 2018 and 2019, respectively.”