“China’s Current Account: External Rebalancing or Capital Flight?”

“China’s Current Account: External Rebalancing or Capital Flight?”

Anna Wong

FRB International Finance Discussion Paper No. 1208, June 2017

With China’s current account surplus falling from about 10 percent of GDP in 2007 to below 1.5 % of GDP in 2013, the days of colossal current account surpluses appear to be a distant memory. In this paper Anna Wong provides evidence that suggests that China’s official current account balance in recent years has been distorted to some extent by large financial outflows disguised as service trade transactions. To do so she uses two empirical approaches. On the one hand the so called mirror approach and on the other hand one that relies on econometric models.