The current account deficit, if it continues, could impact the yuan.

China recorded a surplus. Current accounts By $54.9 billion in the second quarter of 2024, down from a surplus of $59.3 billion in the same period a year earlier, according to preliminary data.

The services account deficit rose sharply to $61.7 billion from $49.2 billion.While the secondary account recorded a close balance with a slight surplus of $2.7 billion, slightly down from $3.1 billion in Q2 2023.

Meanwhile, the goods surplus widened to $167.1 billion from $160.3 billion a year earlier. In line with strong export growth and limited import volatility in the Chinese economy, weak demand in the manufacturing and construction sectors has prompted factories to seek foreign customers to shore up their order books, while weak domestic demand has limited imports of goods.

In addition, the primary account deficit narrowed to $53.2 billion from $54.9 billion.

Here is the relevant chart:

So China’s industrial exports of goods are working, but this is offset by an increase in imports of services from abroad, which can also be a positive factor, because it represents an improvement in domestic consumption, which also means trips abroad or complex services, like insurance.

The decline in current account balances, if it persists, could also have an impact on the yuan exchange rate, which will weaken. It will therefore be necessary to follow its development in the coming months, to understand whether it is just an episode or a more structural change.