Transcript Trade surplus dropped to 2% of GDP in 2011

China’s Capital Flow Situation
Prof. Xuesong Li
Institute of Quantitative & Technical Economics
Chinese Academy of Social Sciences
[email protected]
Meeting of BRICS Economic Research Group
Organized by NIPFP, New Delhi, Feb. 27, 2012
Main Contents

China’s Balance of of Payments in 2011

Trade surplus dropped to 2% of GDP in 2011
The
total bilateral trade value increased rapidly in emerging
markets last year
FDI

in China increased 10% in 2011
Outward direct investment increased 2% in 2011
turnover of China’s foreign contracted projects
increased 12% in 2011
Accomplished
Fluctuations
in cross-border capital flows intensified in China
at the end of 2011
China
may face smaller but more volatile capital inflows
2
China’s Balance of of Payments in 2011（preliminary data）
Unit: A hundred million US dollars, Source: SAFE
Items
1. Current account
A. Goods and services
a. Goods
credits
debits
b. Services
credits
debits
B. Income
C. Current transfers
2. Capital & financial account
Among that：Direct investment
3. International reserve assets
3.1 Monetary gold
3.2 Special drawing rights
3.3 Reserve position in the IMF
3.4 International reserve assets
3.5 Other creditor’s rights
Rows
Q4, 2011
2011
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
598
555
709
5078
4369
-154
479
633
3
40
-474
491
-124
0
0
-8
-117
0
2011
1884
2438
19036
16598
-554
1826
2381
-142
269
1867
1705
-3878
0
5
-34
-3848
0
3
Trade surplus dropped to 2% of GDP in 2011
According to the statistics by the Customs,
China’s imports and exports in 2011 registered US$3.6 trillion with
a year on year increase of 22%.
Among that, exports amounted to US$1.9 trillion, up by 20% year
on year;
Imports was US$1.74 trillion, up by 25%. The growth rate of
imports was about 5 percentage points higher than that of exports.
Trade surplus was US$155 billion, a decrease of 15%. It has
declined in three consecutive years, and it amounted to 2% of GDP,
dropped from 3.1% of GDP in 2010, which was obviously within the
internationally recognized rational zone of trade balance standard.
4
The growth rate of foreign trade was high first
then dropped down last year
For example, China’s imports and exports in December registered
US$333 billion with a year on year increase of 13%. The growth rate
was 5 percentage points lower than that of November.
Among that, exports amounted to US$175 billion, up by 13%, the
growth rate dropped by 0.4 percentage point;
Imports was US$158 billion, up by 12%, the growth rate dropped
by 10 percentage points.
5
The total bilateral trade value increased rapidly
in emerging markets last year
In 2011, the total trade value of Sino-Europe, Sino-US and SinoJapan were up by 18%, 16% and 15%, 4, 6 and 7 percentage points
lower than the overall growth rate respectively.
The total bilateral trade value between China and ASEAN was up
by 24%, 2 percentage points higher than that of overall growth rate.
The total bilateral trade value with China and Brazil, Russia and
South Africa were up by 35%, 43% and 77%, which were all higher
than the overall growth rate.
6
FDI in China increased 10% in 2011
In the whole year of 2011, the actualized FDI in China reached
US$116 billion, up by 10% over the previous year, hitting a new
record once again.
However, similar to the foreign trade, the growth rate of FDI in
China was high first then dropped down last year. In December, the
actualized FDI amounted to US$12 billion, down by 13% year on
year.
7
The value and growth rate of actualized FDI in service
sector exceeded those in manufacturer sector
The actualized FDI in manufacturing sector registered US$52
billion in 2011, up by 5% year on year, accounting for 45% of the
national total amount in the same period.
The actualized FDI in service sector amounted to US$55 billion in
the year, up by 21% year on year, accounting for 48% of the national
total amount in the same period, higher than that in manufacturing
sector for the first time.
8
Asia is the major source of FDI in China,
while FDI from Europe and USA declined
In 2011, the actualized investment from the ten countries or
regions in Asia (Hong Kong, Macao, Taiwan, Japan, Philippines,
Thailand, Malaysia, Singapore, Indonesia and South Korea) totaled
US$101 billion, up by 14% year on year.
However, the actualized investment from the USA registered
US$3 billion, down by 26% year on year; and the EU 27 countries,
US$6 billion, down by 4% year on year.
9
Outward direct investment increased 2% in 2011
According to the statistics by MOFCOM, in 2011, domestic
Chinese investors had directly invested in 3391 overseas enterprises
of 132 countries and regions in non-financial sectors, accumulatively
reaching US$60 billion, up by 2% year on year.
By the end of 2011, domestic Chinese investors established 18
thousand outward investment enterprises in 178 countries and
regions, amounting to US$322 billion in non-financial sectors on an
accumulative basis.
10
ODI increased rapidly to Europe and Africa
In 2011, outward direct investment to Europe and Africa
registered US$4.6 billion and US$1.7 billion, up by 57% and 59%
year on year respectively.
Among that, investment to the EU reached US$4.3 billion, up by
94% year on year.
11
Merger and acquisition was conducted
in broader areas
In 2011, direct investment by merger and acquisition (M&A)
reached US$22 billion, accounting for 37% of the total value of
outward investment in the same period, in the fields such as mining,
manufacturing, electricity generation and supply, transportation,
wholesale and retail, etc.
Sinochem Corporation purchased through its Hong Kong
subsidiary the 40% stocks of Statoil ASA’s Brazil Peregrino oil field
at US$3.07 billion, which was the largest overseas acquisition
project of Chinese enterprises in 2011.
12
There were an increasing number of countries
taking measures to restrict investment from SOEs
Talking about outward investment, a number of countries took
new protection measures against foreign investors such as
restrictions against investment from state-owned enterprises.
UNCTAD has published a report that there were an increasing
number of countries taking measures to restrict foreign investment,
which had certain negative effects on Chinese enterprises’ "going
global" strategy.
Moreover, the unrest and regime change in Middle East and North
Africa increased security risks of Chinese enterprises in outward
investment, making enterprises relatively cautious in making
investment decisions.
13
Accomplished turnover of China’s foreign
contracted projects increased 12% in 2011
In 2011, the accomplished turnover of China’s foreign contracted
projects reached US$103 billion, up by 12% year on year. The value
of newly signed contracts registered US$142 billion, up by about 6%
year on year.
By the end of 2011, for China’s foreign contracted projects, the
value of signed contract reached US$842 billion on an accumulative
basis, and accomplished turnover amounted to US$539 billion.
14
Foreign labor service cooperation
In 2011, all kinds of labor sent abroad by labor cooperation
projects reached 452 thousand, 41 thousand more than that in the
previous year.
By the end of 2011, all kinds of labor sent abroad by labor
cooperation projects numbered 5.9 million on an accumulative basis.
15
Fluctuations in cross-border capital flows
intensified in China at the end of 2011
The outflow of speculative funds, or “hot money,” from China
marked an about-face of international capital, compared with a hot
money inflow totaling $35 billion in 2010.
China faced massive cross-border capital inflows in the first half of
2011, driven by expectations of a stronger Yuan and interest rate
differences between China and other developed economies.
But the inflow trend was interrupted in the second half of last year,
particularly since the end of September 2011 amid the liquidity
crunch in overseas markets and reversed expectations towards the
Yuan in offshore markets.
16
China may face smaller but more volatile capital inflows
Developed countries are unlikely to solve their structural problems
in the short term, and due to the persistent turmoil in global financial
markets, China faces the risk of frequent short-term cross-border
capital flows, China may face smaller but more volatile capital inflows
in the next few years.
Even though the Yuan has become more internationalized over the
past years, the Chinese currency will remain a risky asset instead of a
haven currency, adding foreign exchange regulatory departments
should introduce more tools in the market to hedge against risks to
prepare for more flexible exchange rates of the Yuan.
17
China’s international payments are gradually
moving toward balance
In 2012, the European debt crisis and slow global economic
recovery will have a negative impact on China’s export growth. The
trade surplus will narrow further and current account will move closer
to balance.
China will maintain stable and relatively rapid economic growth for
a long time despite external shocks. International capital, especially
long-term capital, is likely to continue to flow into China on a large
scale.
Fundamental factors will continue to support a surplus of China's
international balance of payment in 2012, but the surplus will fall
sharply with greater volatility. China’s international payments are
gradually moving toward balance.
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