“Dark Matters in China’s Current Account” by Zhiwei Zhang
Hong Kong Monetary Authority
The official statistics shows China's current account moved from 3.6 percent of GDP in 2004 to 11 percent in 2007. This paper argues that the dramatic rise in China's current account is partly due to measurement errors caused by under-recorded profits for foreign investment and a surge in capital flows disguised as trade flows. Under conservative assumptions, these two factors led to an upward bias of 4 percent of GDP in China's current account surplus in 2007.