Goldman: Q223 BoP Suggests Lower Current A/c Surplus & Continued Reserve Accumulation

Goldman Sachs note that China’s “preliminary Q2 2023 BoP data showed a lower current account surplus at 1.5% of GDP, which still more than offset the capital and financial account outflows in the quarter. Reserves continued to increase in Q2 as a result.”

• “Reserve assets showed an increase (higher reserves) in Q2 by US$16bn, in comparison with the US$25bn increase in Q1 2023. Reserve assets showed a bigger increase than the increase in headline FX reserves in Q2, suggesting around -US$10bn valuation effect in FX reserves in Q2.”
• “Looking forward, we expect services deficit to widen further as outbound tourism recovers further. Goods trade surplus can be supported by slow goods import growth, which is partially related to the negative price effect.”