Tricks of China's trade surplus

Forecasts for China's current account surplus vary wildly from a significant rise over the next two years to a slide into deficit. So who's right?

In this article I want to sketch out a scenario in which, rather than analyse policy announcements or make predictions, I try to lay out what are the various possible paths open to China. The scenario concerns trade. China’s current account surplus has declined sharply from its peak of roughly 10 per cent of GDP in the 2007-2008 period to probably just under 4 per cent of GDP last year. Over the next two years the forecast is, depending on who you talk to, either that it will rise significantly, or that it will decline to zero and perhaps even run into deficit. The Ministry of Commerce has argued the latter and the World Bank the former.

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