China's current account surplus shrank dramatically in the 2010s, even turning briefly negative in 2018. This structural shift has profound implications for global capital flows, exchange rates, and the international monetary system.
The Disappearing Surplus
China's current account surplus peaked at 10% of GDP in 2007. By 2018, it had fallen below 1%, occasionally dipping into deficit. This reflects both rebalancing toward consumption and rising imports of services and commodities.
Drivers of Change
Rising labor costs reduced manufacturing competitiveness. Growing Chinese tourism abroad created service deficits. Income effects from accumulated foreign assets were smaller than expected.
Global Implications
A China that no longer generates large surpluses can no longer finance global deficits through reserve accumulation. This has implications for US treasury markets and the dollar's international role.