BOP 2016

China's balance of payments continued to display "surplus under the current account and deficit under the capital and financial account (excluding reserve assets, the same below)" in 2016. Specifically, the surplus under the current account accounted for 1.8 percent of Gross Domestic Product (GDP), a decline of 0.9 percentage point from the level in 2015, but still within the accepted range. The deficit under the financial account excluding reserve assets reached $417 billion, a drop of 4 percent. As of the end of 2016, the balance of China's foreign exchange reserves was $3.0105 trillion, down by 10 percent year-on-year.

(I) The surplus under the current account experienced a modest decline

Trade in goods sustained a high surplus. According to the statistical coverage of the balance of payments, in 2016 China's goods exports and imports amounted to $1,989.5 billion and $1,495.4 billion, a year-on-year decline of 7 percent and 5 percent, respectively. The surplus was $494.1 billion, down by 14 percent from the historical high in 2015, but markedly higher than that of 2014 and the previous years.

The deficit in trade in services registered slower growth. In 2016, receipts from trade in services reached $208.4 billion, a drop of 4 percent year on year, whereas payments reached $452.6 billion, a rise of 4 percent. The deficit reached $244.2 billion, a rise of 12 percent. Particularly, travel registered a deficit of $216.7 billion, up by 6 percent, which was down by 6 percentage points year-on-year though.

The primary income remained in deficit. In 2016, income under the primary income reached $225.8 billion, a year-on-year rise of 1 percent, whereas payments reached $269.8 billion, a rise of 2 percent. The deficit totaled $44 billion, a rise of 7 percent. Specifically, employee compensation recorded a surplus of $20.7 billion, a year-on-year drop of 25 percent. Investment income registered a deficit of $65 billion, a drop of 6 percent. The investment income shows that China posted $198.4 billion in income from outbound investments, up by 5 percent; profits, interests and dividends of foreign investments in China reached $263.4 billion, up by 2 percent.

The secondary income recorded a lower deficit. In 2016, the secondary income registered receipts of $30.9 billion, decreasing by 14 percent year-on-year; whereas payments reached $40.4 billion, a drop of 17 percent. The deficit reached $9.5 billion, a drop of 25 percent.

(II) Financial account excluding reserve assets registered a narrower deficit

Direct investments changed to a deficit. According to the statistical coverage of the balance of payments, direct investments posted a deficit of $46.6 billion in 2016, as compared with a surplus of $68.1 billion in 2015. Specifically, assets under direct investment rose by $217.2 billion net, which was up by 25 percent year-on-year. Liabilities under direct investment increased by $170.6 billion net, which was down by 30 percent year-on-year.

Portfolio investment registered a narrower deficit. In 2016, portfolio investments recorded a deficit of $62.2 billion, a drop of 6 percent from the level in 2015. Specifically, net outflows of China's external portfolio investments were $103.4 billion, up by 41 percent, whereas net inflows of portfolio investments into China from overseas reached $41.2 billion, up by 512 percent.

Deficits of other investments declined sharply. In 2016, China's loans, trade credit, cash deposits and other investments registered a deficit of $303.5 billion, down by 30 percent from the level in 2015. Whereas, other outbound investments of China rose by $333.6 billion net, up by 305 percent; other foreign investments into China rose by $30.1 billion net, compared with a net decrease of $51.5 billion in 2015.

(III) Reserves assets continued to decrease

In 2016, after deducting the changes in non-transaction values such as exchange rates and prices, China's reserve assets formed by transactions decreased by $443.7 billion. Specifically, foreign exchange reserve assets formed by transactions registered a decrease of $448.7 billion. By the end of 2016, the balance of China's foreign exchange reserves totaled $3,010.5 billion.

(IV) Net errors and omissions on the debit side

In 2016, net errors and omissions reached $222.7 billion on the debit side, accounting for 6.4 percent of the combined value of exports and imports of goods based on the balance of payments statistical coverage for the period.

The balance of payments (BOP), also known as balance of international payments, summarizes all transactions that a country's individuals, companies, and government bodies complete with individuals, companies, and government bodies outside the country. These transactions consist of imports and exports of goods, services, and capital, as well as transfer payments, such as foreign aid and remittances.

The balance of payments divides transactions into two accounts: the current account and the capital account. The current account includes transactions in goods, services, investment income, and current transfers. The capital account, broadly defined, includes transactions in financial instruments and central bank reserves. Narrowly defined, it includes only transactions in financial instruments.