BOP 2018

In 2018, China's current account maintained basic equilibrium, and the financial account excluding reserve assets remained in surplus. Specifically, the surplus under the current account as a percentage of GDP was 0.4 percent, which was within a reasonable range. The financial account excluding reserve assets posted a surplus of $130.6 billion, an increase of $21 billion from 2017.

(I) The current account maintained basic equilibrium

The trade in goods was more balanced. In 2018, China's exports and imports of trade in goods amounted to $2,417.4 billion and $2,022.3 billion, a year-on-year increase of 9.1 percent and 16.2 percent respectively. The surplus amounted to $395.2 billion, down by 17.0 percent.

The deficit in trade in services grew steadily. In 2018, revenue from trade in services reached $233.6 billion, up by 9.6 percent year-on-year, and the expenditures reached $525.8 billion, up by 11.4 percent. The deficit reached $292.2 billion, up by 12.9 percent. Specifically, the deficit under transportation increased by 19.5 percent to $66.9 billion; while the deficit under travel increased by 8.0 percent to $237 billion.

The primary income posted a deficit. In 2018, revenue and expenditures under the primary income reached $234.8 billion and $286.2 billion, a year-on-year drop of 18.3 percent and 3.8 percent respectively, leading to a deficit of $51.4 billion. Specifically, employee compensation recorded a surplus of $8.2 billion, while investment income registered a deficit of $61.4 billion.

Revenue from outward investments posted $214.6 billion, and expenditures for inward investment, including profits, interests and dividends of foreign-funded enterprises, totaled $276 billion.

The deficit in secondary income shrank. In 2018, the secondary income registered revenue of $27.8 billion, down by 1.5 percent year-on-year; whereas expenditures reached $30.2 billion, down by 24.6 percent year-on-year. The deficit reached $2.4 billion, down by 79.7 percent year-on-year.

(II) The surplus in financial account excluding reserve assets increased.

Surplus under direct investment expanded. In 2018, direct investment registered a surplus of $107 billion, an increase of 1.9 times from the year of 2017. Specifically, China's outward direct investment (the net increase in assets) reached $96.5 billion, down by 30.2 percent year-on-year, whereas the inward foreign direct investment (the net increase in liabilities) reached $203.5 billion, up by 22.5 percent.

The surplus under portfolio investment increased substantially. In 2018, portfolio investment recorded a surplus of $106.7 billion, 2.6 times more than that of 2017. Specifically, China's outward portfolio investment (the net increase in assets) totaled $53.5 billion, down by 43.6 percent, whereas the inward portfolio investment (the net increase in liabilities) reached $160.2 billion, up by 28.9 percent.

Other investment turned to deficit. In 2018, other investment, including loans and trade credits, recorded a deficit of $77 billion, compared with a surplus of $51.9 billion in 2017. Specifically, China's net outflows of outward other investment (the net increase in assets) reached $198.4 billion, up by 96.8 percent year-on-year, and the net inflows of inward other investment (the net increase in liabilities) hit $121.4 billion, down by 20.5 percent.

(III) Reserve assets remained basically stable

In 2018, reserve assets involving transactions (excluding the effects of changes in non-transactional factors, such as the exchange rate and prices) increased by $18.9 billion. Specifically, foreign exchange reserves involving transactions registered an increase of $18.2 billion. As of the end of 2018, affected by changes in non-transactional factors such as exchange rate and prices, China's reserve assets stood at $3,072.7 billion, a drop of $67.2 billion from the end of 2017.

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.