China’s great trade mystery continues to deepen
Beijing’s data discrepancies could hide the real balance of payments surplus of around ‘US$700 billion’
China appears to have been cooking the books to hide its ballooning balance of payments surplus. Data discrepancies could hide the real numbers, which are “closer to US$700 billion.”
The eye-watering figures would be “more than double the reported current account surplus of $253 billion” in 2023.
“China has a new way of calculating its goods surplus in its formal balance of payments data. It is a deeply misleading,” Brad W Setser, of the Council on Foreign Relations, and a former United States Trade and Treasury official, said.
“It also explains the apparent fall in the current account surplus,” he wrote in a blog post, entitled China’s imaginary trade data, for CFR last month.
Data dilemma:
- Balance of payments, or BoP, “is the method used to monitor all international monetary transactions in a specific period.
- BoP is usually calculated every quarter and annually. It involves a country’s trade and financial surplus.
- In China, it is compiled by the State Administration of Foreign Exchange or SAFE, which is rather ironic considering the data controversy.
- According to the US Treasury estimate, the discrepancy in the trade surplus was the equivalent of more than 1% of China’s GDP last year.
These are enormous gaps that call into question […the data].
Brad W Setser, of the Council on Foreign Relations
Delve deeper: As reported by Bloomberg News, Setser estimated “that China’s external surplus is closer to $700 billion, more than double the reported current account surplus of $253 billion last year.”
Between the lines: “These are enormous gaps that call into question some of the adjustments that China is making to that data,” he told Bloomberg on the sidelines of the Bund Summit in Shanghai last week.
Big picture: Beijing has continued to ramp up exports of green tech, such as electric vehicles, solar panels, wind turbines, and electronics. But they are likely to “widen, not reduce,” China’s “global current account imbalance.”
China Factor comment: The world’s second-largest economy is grappling with a property crisis, rising unemployment, and shrinking consumer spending. Overcapacity at home has triggered a tsunami-style wave of exports and a trade war with the United States and Europe.