In their latest quarterly report on China, the World Bank’s Beijing office estimates that China’s current account surplus will reach $220 billion, or 8.3% of China’s GDP, in 2006. With an estimated $65b in net FDI inflows, the surplus in China’s basic balance of payments will be close to $285b, 10.7% of China’s GDP.
There are some problems with China’s current account data. Reported profits on FDI in China are a bit too low, helping to push up China’s overall income balance. And it is possible that the current account surplus may include some disguised capital inflows, as China has cracked down on other ways of moving money into China. But the basic story is still clear.[Full Text]