Shrinking Chinese surplus of current account
China has been pampered over the last few years with continuous growing surplus but these times seem to be of the past because the newest figures for 2011 show a decline in a ratio to the GDP Gross National Product.
China’s current account surplus for 2011 declined from USD 305.4 billion to USD 201.1 billion and in ratio to the GDP the fall was about 2.7 % the long established average was 4% and experts believe this is due to an imbalance to the Chinese currency outside value. Before, the falls in 2009 were considered as a cyclical effect and the result of the investment based domestic stimulus leading to a surge in commodity imports and recession in major trade partners’ economy and thus less exports from China.
Now the IMF International Monetary Fund predicts that China’s current account surplus will be in the range of 3.8 % in 2013 thus way down from a previous forecast of 6.2 % last September. It has to be noted that also the value of China’s foreign-exchange was falling unexpected in the final quarter of 2011 also pointing to the fact that the Chinese currency is undervalued. The estimates for the Yuan appreciation against the USD in 2012 is revised to 2 to 3 %, compared with gains of 5.1 % in 2011. This means that the Yuan is only slowly moving up whereas other regional currencies such as the Singapore dollar and the Malaysian currency are advancing faster. Experts believe that Hong Kong will be affected because so far a favourable exchange rate was nicely rewarding earnings, now this benefit is at stake. Hong Kong has helped to place offshore Yuan bonds and investors accepted lower yields for 2011 because of the appreciation of the Yuan and by consequence the issuance of such bonds fell by 26% quarter-to-quarter and if the appreciation of the Chinese currency continues at a very slow pace this could affect also Hong Kong’s economy.