Preliminary data from the State Administration of Foreign Exchange (SAFE) shows that China posted a $117.3 billion deficit on its capital and financial account last year. China had a $222.1 billion surplus on the account in 2011. The outflows continued in the fourth quarter of 2012 as they had in the third, suggesting a lack of confidence among investors about the economic outlook for the country, and the global flight to safe-haven assets amid the uncertainties of the global economy. There is some sign that this beginning to turn round as the pace of growth picks up again.
China’s overall balance of payments remained positive because of a heavy current account surplus of $213.8 billion. The ratio of the current account surplus to GDP was down to 2.6% last year, compared to more than 10% in 2007. The question is how much of all this is a sign of structural rebalancing of economy and how much a cyclical response to the global downturn.