As the World Bank pointed out in it’s December (2008) China Quarterly:
“Despite export volume weakness, China’s current account surplus is likely to increase further in 2009 due to the lower raw commodity prices. Even as import volumes are likely to outpace export volumes significantly, the large improvement in the terms of trade due to lower primary commodity prices is set to boost the current account surplus to almost US$ 430 billion, or 9 percent of GDP, in 2009”
As the world plunges into the trough of the worst recession post-WWII, China’s record external reserves will rise, even as it joins the other Members of the G‑7 in stimulus spending of about $US585bn over the next two years.
|China’s External Balances|
|Curr acct balance (US$ bln)||161||250||372||386||427|
|As share of GDP (%)||7.1||9.5||11.3||9.3||8.9|
|Capital account balance||47||-3||90||130||70|
|Growth in reserves||207||247||462||517||502|
|Foreign exch. reserves (US$ bln)||819||1066||1528||2045||2547|
|Source: World Bank. *=projections|
Of course the Chinese exchange rate is appreciating under tight control (it has risen about 25 points since 2005), which goes some way to raising imports and contributing to global reflation (but not far enough to shift long-term growth patterns away from capital accumulation to consumption).
The Renminbi appreciation, however, has the impact of making the minerals shopping spree more affordable (in Rmb. terms)!