China: C/A surplus likely to widen to a decade high – Standard Chartered

Goods trade surplus could narrow in H2 on normalisation of front-loaded exports, pick-up in imports. The tourism trade deficit may narrow in 2025 as China’s visa-free policy boosts inbound tourism, Standard Chartered's economists report.

Net exports likely to remain a growth driver in 2025

"China’s current account (C/A) surplus reached a new quarterly high of USD 165bn in Q1, as per the balance-of-payments (BoP) data. The C/A surplus may remain sizeable in Q2, as merchandise export growth stayed robust in April-May partly on front-loading activity amid US tariff uncertainty. In addition, imports declined y/y on soft demand and falling commodity prices. As such, we expect net exports to have contributed significantly to H1 GDP growth of c.5% y/y."

"However, net exports’ contribution to growth could moderate in H2. We expect the goods trade surplus to shrink in H2 as front-loaded export orders normalise and tariffs start to have an impact. Goods export growth is likely to turn negative in Q4. We think the decline in imports will ease in H2 partly on base effects, but may persist on still-soft domestic demand."

"We revise higher our 2025 C/A surplus forecast to 2.8% of GDP (from 1% prior) as (1) the annual goods trade surplus is likely to reach a record high this year on strong H1 performance; (2) the annual services trade deficit may moderate as inbound tourism likely expands faster (on China’s visa-free policy expansion) than outbound tourism (due to local students’ increased concerns over studying overseas); and (3) nominal GDP could grow slower than we previously forecast on deflationary pressure, lowering the denominator for estimating the C/A-to-GDP ratio."