Current Account:

1.Current account balance in % of GDP

Current account balance is the sum of net exports of goods, services, net income, and net current
transfers. China current account balance (% of GDP) was at level of 1.8 % in 2016, down from
2.7 % previous year.

Year Value Change in %

2016 1.8 -36.21%
2015 2.7 22.08%
2014 2.3 45.97%
2013 1.5 -38.69%
2012 2.5 40.00%
2011 1.8 -53.89%
2010 3.9 -18.11%
2009 4.8 -47.95%
2008 9.1 -8.01%
2007 9.9 18.03%
2006 8.4 45.47%
2005 5.8

120%

100%

80%

60% Change in %
Value
40%

20%

0%
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
2.Current account balance in current prices
China current account balance was at level of 196,380 million US dollars in 2016, down from
304,164 million US dollars previous year, this is a change of 35.44 %.

Year Value Change in %

2016 196,380,229,053 -35.44%
2015 304,164,445,643 28.86%
2014 236,046,577,874 59.27%
2013 148,203,949,880 -31.19%
2012 215,391,747,469 58.26%
2011 136,096,761,578 -42.77%
2010 237,810,389,608 -2.24%
2009 243,256,567,920 -42.16%
2008 420,568,516,144 19.08%
2007 353,182,677,237 52.34%
2006 231,843,041,064 75.14%
2005 132,378,493,766

4.5E+11
4E+11
3.5E+11
3E+11
2.5E+11 Year
2E+11 Value
1.5E+11 Change in %
1E+11
5E+10
0
-5E+10 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

3.Net trade in goods and services in current prices

Net trade in goods and services is derived by offsetting imports of goods and services against
exports of goods and services. Exports and imports of goods and services comprise all
transactions involving a change of ownership of goods and services between residents of one
country and the rest of the world. Data are in current U.S. dollars.

Year Value Change in %

2016 249,913,893,417 -30.17%
2015 357,870,764,281 61.71%
2014 221,299,246,947 -5.98%
2013 235,379,561,604 1.52%
2012 231,844,876,748 27.45%
2011 181,903,738,913 -18.44%
2010 223,023,871,713 1.31%
2009 220,130,401,367 -36.90%
2008 348,832,533,154 13.24%
2007 308,036,028,783 47.44%
2006 208,918,924,501 67.64%
2005 124,626,797,517

400,000,000,000
350,000,000,000
300,000,000,000
250,000,000,000
200,000,000,000
150,000,000,000 Value
100,000,000,000
Change in %
50,000,000,000
0
-50,000,000,000 201620152014
201320122011
201020092008
20072006
2005

In 2016, net trade in goods and services for China was 249,913 million us dollars. Though China
net trade in goods and services fluctuated substantially in recent years, it tended to increase
through 1997 - 2016 period ending at 249,913 million US dollars in 2016.
4.Exports of goods, services and primary income in current
prices

Exports of goods, services and income is the sum of goods (merchandise) exports, exports of
(nonfactor) services and income (factor) receipts. Data are in current U.S. dollars. In 2016,
exports of goods, services and primary income for China was 2,423,740 million us dollars.
Exports of goods, services and primary income of China increased from 146,243 million US
dollars in 1997 to 2,423,740 million US dollars in 2016 growing at an average annual rate of
17.54 %.

Year Value Change in %

2016 2,423,740,432,360 -6.18%
2015 2,583,352,015,700 -4.40%
2014 2,702,274,321,141 6.41%
2013 2,539,567,897,419 8.43%
2012 2,342,129,055,769 8.78%
2011 2,153,120,036,894 23.29%
2010 1,746,368,646,003 28.60%
2009 1,357,974,408,001 -15.50%
2008 1,607,104,247,637 19.89%
2007 1,340,528,796,933 28.12%
2006 1,046,294,573,490 28.76%
2005 812,611,838,954

3E+12

2.5E+12

2E+12

1.5E+12 Year
Value
1E+12
Change in %

5E+11

0
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
-5E+11
5.Imports of goods, services and primary income in current
prices

Imports of goods, services and income is the sum of goods (merchandise) imports, imports of
(nonfactor) services and income (factor) payments. Data are in current U.S. dollars. In 2016,
imports of goods, services and primary income for China was 2,217,839 million us dollars.
Imports of goods, services and primary income of China increased from 114,424 million US
dollars in 1997 to 2,217,839 million US dollars in 2016 growing at an average annual rate of
18.45 %.

Year Value Change in %

2016 2,217,839,941,043 -2.15%
2015 2,266,538,241,616 -8.15%
2014 2,467,673,859,885 3.57%
2013 2,382,630,464,835 11.85%
2012 2,130,171,010,354 4.34%
2011 2,041,533,864,905 31.78%
2010 1,549,244,113,376 35.14%
2009 1,146,376,587,166 -6.78%
2008 1,229,691,683,988 20.03%
2007 1,024,448,405,992 21.59%
2006 842,519,033,925 19.66%
2005 704,098,844,540

2.5E+12
2E+12
1.5E+12
Year
1E+12
5E+11 Value
0 Change in %
-5E+11 2016 2015 2014
2013 2012 2011
2010 2009 Year
2008 2007
2006 2005
6.Trade in services in % of GDP

In 2016, trade in services (% of gdp) for China was 5.9 %. Though China trade in services (% of
GDP) fluctuated substantially in recent years, it tended to decrease through 1997 - 2016 period
ending at 5.9 % in 2016. Trade in services is the sum of service exports and imports divided by
the value of GDP, all in current U.S. dollars.

Year Value Change in %

2016 5.9 -0.01%
2015 5.9 -5.10%
2014 6.2 11.16%
2013 5.6 -0.79%
2012 5.6 -4.84%
2011 5.9 39.92%
2010 4.2 -19.38%
2009 5.3 -19.91%
2008 6.6 -8.44%
2007 7.2 1.19%
2006 7.1 -0.34%
2005 7.1
102%

100%

98%

96%

94% Change in %

92% Value

90%

88%

86%
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

7.Net primary income in current prices

Net primary income refers to receipts and payments of employee compensation paid to
nonresident workers and investment income (receipts and payments on direct investment,
portfolio investment, other investments, and receipts on reserve assets). Data are in current U.S.
dollars.
Year Value Change in %
2016 -44,013,402,100 7.20%
2015 -41,056,990,197 -408.67%
2014 13,301,214,309 -116.96%
2013 -78,442,129,020 294.44%
2012 -19,886,831,334 -71.72%
2011 -70,317,566,924 171.50%
2010 -25,899,339,086 203.53%
2009 -8,532,580,532 -129.86%
2008 28,580,030,495 255.28%
2007 8,044,362,157 -256.40%
2006 -5,143,384,936 -68.08%
2005 -16,113,803,103

4E+10

2E+10

0
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
-2E+10 Year
Value
-4E+10 Change in %

-6E+10

-8E+10

-1E+11

In 2016, net primary income for China was -44,013 million us dollars. Though China net
primary income fluctuated substantially in recent years, it tended to decrease through 1997 -
2016 period ending at -44,013 million US dollars in 2016.

8.Net secondary income in current prices

Net current transfers are recorded in the balance of payments whenever an economy provides or
receives goods, services, income, or financial items without a quid pro quo. All transfers not
considered to be capital are current. Data are in current U.S. dollars
 Year Value Change in %
2016 -9,520,262,264 -24.74%
2015 -12,649,328,441 -974.71%
2014 1,446,116,617 -116.56%
2013 -8,733,482,704 -354.35%
2012 3,433,702,055 -85.99%
2011 24,510,589,588 -39.76%
2010 40,685,856,981 28.51%
2009 31,658,747,085 -26.64%
2008 43,155,952,495 16.32%
2007 37,102,286,297 32.19%
2006 28,067,501,500 17.61%
2005 23,865,499,352

5E+10

4E+10

3E+10

2E+10 Year
Value

Value
1E+10 Change in %

0
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
-1E+10

-2E+10

In 2016, net secondary income for China was -9,520 million us dollars. Though China net
secondary income fluctuated substantially in recent years, it tended to decrease through 1997 -
2016 period ending at -9,520 million US dollars in 2016.
SWOT Analysis of BOP:
Massive trade deficits have been the fundamental weakness in the balance of payments and the
underlying reason for balance of payments crises. Large remittances from abroad and significant
earnings from tourism have been the strengths in the balance of payments. However, these
remittances from abroad and earnings from tourism that offset the trade deficit have been
weakening this year.

1.Strength of foreign exchange and balance of payment of China

 Strong FX reserves and external surpluses
 Large domestic market
 Huge industrial base
 Solid growth prospects
 Low public and external debt
 Improvement in macro-prudential management
 Increasing market orientation
1.Goods exports refer to all movable goods (including nonmonetary gold and net exports of
goods under merchanting) involved in a change of ownership from residents to nonresidents.
Data are in current U.S. dollars. In 2016, exports of goods for China was 1,989,518 million us
dollars. Exports of goods of China increased from 82,983 million US dollars in 1997 to
1,989,518 million US dollars in 2016 growing at an average annual rate of 22.11 %.

China is the largest export economy in the world. In 2016, China exported $2.06T and
imported $1.32T, resulting in a positive trade balance of $736B. In 2016 the GDP of China
was $11.2T and its GDP per capita was $15.5k.

The top exports of China are Computers ($136B), Broadcasting

Equipment ($115B), Telephones($84.3B), Integrated Circuits ($54.8B) and Light
 Fixtures ($29.7B), using the 1992 revision of the HS (Harmonized System) classification.
Its top imports are Integrated Circuits ($128B), Crude
Petroleum($116B), Gold ($62.6B), Iron Ore ($58B) and Cars($44B).

In 2016 China exported $2.06T ,making it the largest exporter in the world. During the last five
years the exports of China have decreased at an annualized rate of -8.07%, from $ 2.04T in 2011
to $2.06T in 2016.The most recent exports are led by computers which represent 6.63% of the
total exports of China, followed by Broadcasting Equipment,which account for 5.61%.
 The top export destinations of China are the United States ($385B), Hong
Kong ($287B), Japan ($129B), South Korea ($93.7B) and Germany ($65.2B). The top
import origins are Hong Kong ($285B), South Korea($124B), the United
States ($115B), Japan ($113B) and Germany ($85.4B).

China borders Afghanistan, Bhutan, Hong

Kong, India, Kazakhstan, Kyrgyzstan, Laos, Macau, Mongolia, Nepal, Pakistan, North
Korea, Tajikistan, Vietnam and Russia by land and Brunei, Indonesia, Japan, South
Korea, Malaysia, the Philippines and Taiwan by sea.

2.Services refer to economic output of intangible commodities that may be produced, transferred,
and consumed at the same time. Data are in current U.S. dollars. In 2016, exports of services for
China was 208,403 million us dollars. Though China exports of services fluctuated substantially
in recent years, it tended to increase through 1997 - 2016 period ending at 208,403 million US
dollars in 2016.
ICTs sector contribution is increasing rapidly. As we know that the future competition will be
acute than current days and one of the most demandable product will be ICT products, so, it’s
rapid increment reveals the strong side of their balance of payment.

3.China takes the strategy of diversification in exporting as well as in importing rather than
concentration. In 2016 China imported $1.32T, making it the 2nd largest importer in the world .
During the last five years the importers of China have decreased at an annualized rate of -
14.03%,from $1.39T in 2011 to $1.32T in 2016. The most recent imports are led by integrated
circuits which represent 9.7% of the total imports of China, followed by crude petroleum, which
account for 8.84%.
4.China always maintains a positive balance in their secondary income. A large amount of inflow
comes from the worker’s remittance. So, the greater amount of this influence greatly in balance of
payment.
5.China has a large volume of investment in other countries in both direct and portfolio form. Every
year they receive a handsome amount of return from this which contributes a lot to their balance of
payment.

6.As of 2016 China had a positive trade balance of $736B in net exports. As compared to their
trade balance in 1995 when they still had a positive trade balance of $79.8B in net exports.

So, it is observed that there have some advantageous positions of China’s balance of payment
and foreign exchange. The large of exports composing computers, there has comparative
advantage in producing and exporting goods ,the diversification of exports and imports, the
regular inflow return from foreign investment, the stable remittance inflow, positive capital
account balance, and free ports and airport facilities are the strengths of China’s balance of
payment and foreign exchange.

2.Weakness of Balance of payment of China

1.Export composition of China:

During the last five years the exports of China have decreased at an annualized rate of -8.07%,
from $ 2.04T in 2011 to $2.06T in 2016.The most recent exports are led by computers which
represent 6.63% of the total exports of China, followed by Broadcasting Equipment,which
account for 5.61%.

Export is limited to few commodities. The most recent imports are led by integrated circuits
which represent 9.7% of the total imports of China, followed by crude petroleum, which account
for 8.84%.

Export potential of non-traditional items that are regarded as other is very low. It indicates that
the export of China are not well diversified which is a big enough problem.

2.Country wise export of China:

Export of China is also limited to some concentrated countries that will pose threat at any time
due to lack of proper foreign policy.
Every year, a large amount of foreign direct investment come into the country which help to
expedited the growth of GDP. In 2011 and 2015, it was 5.61% and 2.56% of total GDP.

3.Others:

 Difficult business environment, lack of transparency

 High corporate debt
 High inequality, low share of private consumption to GDP regarding the economic
performance
 Competitiveness erosion
 Key sectors with overcapacities (steel, e.g.)
 Continued geopolitical tensions with key countries in the region.

3.Opportunities of foreign exchange & BOP of China:

1.Slowing pace
The economy started 2017 on a positive note supported by improving exports and supportive
macro-polices. Retail sales growth remained firm, industrial production and investment showed
some signs of revival.

Growth is expected to decelerate somewhat towards +6.3% in 2018 (after +6.7% in 2017) as a
result of a moderation of credit growth. The central bank and the financial regulator have stepped
up measures to contain financial risks namely bubbly property markets, a rise in shadow banking
activities and an elevated corporate debt. Fiscal policy will remain expansionary to avert a sharp
slowdown. Private consumption would continue to grow at a strong pace driven by continued
rise in wages and (still) solid labour market. Risks, on balance, are still elevated. Domestic
imbalances (debt and excess capacity, e.g.) prevail and require quick actions from policy makers.
External sources of risk stem from fragile trade environment, and uncertain (trade, monetary)
policy orientations in the US.

2.While financial authorities tighten, the government keeps the fiscal tap open
Fears of deflation have reduced compared to last year. Signs of reflation have broadened.
Producer price inflation returned to expansion. Consumer inflation is at a decent level, hovering
in a +1% - 2% range. Against this background, financial authorities are set to prioritize financial
stability over growth. While the official stance is neutral, signs of a gradual tightening are
increasing. These includes especially: tightened lending rules to limit corporate leverage and
risky lending (shadow banking, e.g.); stricter rules on property purchases in order to cool
housing prices.

Public finances are set to deteriorate further as the government extends it support to the
economy. Public deficit will be around 4% GDP in 2017. However, rising public should not pose
a significant risk to the economy in the short-term due to a relatively low base (below 60% GDP)
and a favourable composition (mainly held domestically).

3.External position shows signs of weaknesses but remains strong overall

The current account surplus is large due to a robust trade surplus. Despite a strong fall in reserves
over last two years ,external vulnerabilities remain under control with large import cover and low
external debt. On the currency front,downward pressures persist due to diverging monetary
policy with the united States and investors corners.
4. Other opportunities:

 As a world’s 2nd largest economy,China’s still growing faster than developed counties
 Rapidly emerging market segments
 Strong demand for western brands,products,& services.
 Massive investment in infrastructure,but now looking to rebalance in favour of
consumption
 Still a source of low cost and high quality supply despite rising wage cost.

In terms of overall nominal GDP, China now stands as the world’s second largest economy
behind the U.S., and should surpass the U.S. within a decade. As for trade, China ranks as the
United States’ second largest trading partner. In 2011, U.S. goods exports to China came in at
$103.9 billion. Twenty years earlier, those exports stood at $6.3 billion. That 1,549 percent
growth over two decades represents an explosion of opportunity for businesses and workers.
Meanwhile, imports from China grew from $19 billion in 1991 to $399.3 billion in 2011. That
2,002 percent leap higher points to expanded choices and better prices for American consumers,
as well as businesses purchasing capital goods. At the same time, though, uncertainties and
threats lurk on China. Harry Broadman, chief economist at Pricewaterhouse Coopers, highlighted
the inherent tensions in China’s economic and political systems.

After all, this is a nation run by communists who still issue five-year plans, yet at the same time
tout markets and opening up their economy. Broadman noted that being caught between a
capitalist economy and a socialist-market economy means China has problems like trying to get
state-owned enterprises to behave like private firms focused on maximizing profits and
minimizing costs. And China’s banks are not true commercial banks, but instead state-owned
entities that lend to state-owned enterprises. It also must be noted that when the nation’s
population is considered, China still very much is a developing country. For example, China’s
per capita GDP ranks a mere 119th out of 226 nations, according to the CIA World Factbook,
while the U.S. ranks number 12.

4.Threats of BOP of China:

1.Current Account Deficit:

The current account of China and other countries has three components: 1) the exports of goods
and services minus the imports of goods and services; 2) the difference of incomes that countries
pay to each other; and 3) the difference in transfers that countries make to each other. A current
account deficit means that the country needs to find financing for its imports. The foreign
currencies it receives from selling products abroad are not enough to pay for the products it
wants to buy from other countries.

2.Threats from Income Account:

China’s income account follows a decrease in credit side and increase in debit side. Which indicates
credit side volatility and follows a continuous decline over the time.

• So for this country declining trend in the credit side may result in a serious problem for its
sustainability.

• It also indicates that rest of the world is utilizing it resources to their own benefit and making
themselves rich at the cost of this country.

• Increasing trend in debit side indicates that more cash outflow which reflects less resource is
remaining for the economy.

3.Importgrowth

Imports have been increasing in recent years at a much higher rate than exports. The increase in
imports by 19.4 percent in the first quarter of this year is an unprecedented rise. While all
categories of imports increased, the highest increase was in intermediate imports. An 82 percent
increase in fuel imports was mainly responsible for this escalation. The much improved rainfall
should reduce fuel imports for thermal generation.

Foreign ownership of businesses in China frequently has to be structured through offshore

vehicles, and controlled via operating agreements that can be limited and present significant
challenges. Poor property rights also ranks as a major threat. Again, not necessarily surprising
with a communist government. The Chinese government, of course, has been saying many of the
right things in recent times about intellectual property rights, but that has not translated into a
substantial, positive shift in actual policy. It was noted, “A wide spectrum of U.S. rights holders
reports serious obstacles to effective protection and enforcement of all forms of IPR in China,
including patents, trademarks, copyrights, trade secrets, and protection of pharmaceutical test
data.” In addition, “many companies are concerned that Chinese government agencies are
inappropriately using market access and investment approvals as a means to compel foreign
firms to license or sell their IPR to domestic Chinese entities.”

Finally, issues like corruption and human rights abuses present real problems. Those realities
once again came into focus recently with the apparent murder of a British businessman in China,
and the wife of a senior communist government official being a suspect. And then there’s the
controversy over Chen Guangcheng, the blind Chinese legal activist who has criticized forced
abortions and sterilizations under China’s one-child policy. He has faced prison, home detention,
abuse of his family, and (when this column was written) confinement to a hospital, awaiting a
decision on a new passport and his ability to leave for the U.S.

China’s portfolio investment in liability shows an increasing trend in comparison with portfolio
investment in asset which is the potential reason for its insolvency and eventually less capacity to
use the existing opportunities in the other countries. It is raising exposure to China’s sudden
stops. This risk is contained by the relatively small stock of short term external liabilities and the
substantial liabilities and the substantial foreign exchange reserves.

Here’s to hoping that this formidable nation makes a complete, peaceful transition to true
freedom and even greater opportunity. If China does, both the Chinese and Americans will
prosper as a result.