This year's $28 billion first-quarter current account deficit set a historical record for China. It partly reflects the typical dip in the first-quarter goods trade surplus and China's growing services trade deficit. In the first three months of this year, spending of Chinese tourists abroad increased by 14 % y-o-y to a record $74 billion. Tourist spending in China, in contrast, remained at the 1Q17 level and the travel services trade deficit was $64 billion. Overall, there was a record services trade deficit of $76 billion. The value of goods exports was up 11 % y-o-y and the value of imports was up by 21 %, narrowing the goods trade surplus to $53 billion.
The goods trade surplus has traditionally kept China's current account in the black. Over the past 25 years, the current account only briefly dipped into negative territory in 2001. China's current account is still in the black on year, but the overall surplus has shrunk to just 1 % of GDP. The current account surplus is expected to shrink in coming years as China shifts to a service economy, rapid growth in household consumption cuts into the goods trade surplus and the tourism deficit rises along with Chinese living standards.
China's main current account categories relative to GDP
Sources: SAFE and Macrobond.