Nation to maintain current account surplus at low level

Services trade deficit to widen, says SAFE

China will maintain a steady surplus of current account in the near future, while keeping it at low level, China's foreign exchange regulator said on Monday.

The country's current account surplus was 3 percent of the GDP in the first quarter of this year, below a reasonable level of 4 percent by international standards, Du Peng, chief of the current account department of the State Administration of Foreign Exchange (SAFE), said at a news briefing in Beijing.

The current account surplus was 2.1 percent in 2013 and 2.6 percent in 2012, official data showed.

Current account tracks flows of goods and services trade in a country's balance of payments.

"The deficit in services trade is expected to be larger in future, especially in sectors of tourism and overseas education," as a result of increasing domestic demand, he said.

Despite a rise in the deficit in services trade, the overall surplus in the current account will be balanced and stay at a low ratio to the GDP, Du said.

The foreign exchange regulator is mulling how to deal with further US tapering of QE measures and its potential impact on China's cross-border capital movement, he noted without elaborating.

China has relaxed controls on foreign exchange to facilitate the trade of goods and services, but tightened grip over fake trade to bypass foreign exchange rules.

The SAFE has reformed its management practice on foreign exchange since 2009 by simplifying administrative reviews and approvals, focusing on post-event management and monitoring rather than prior scrutinizing deal one by one, Du said.

Following the implementation of the reform measures, the efficiency for enterprises receiving and making payments in foreign currency has greatly improved, with average proceeding time reduced by 70 and 85 percent respectively, according to Du.

Meanwhile, China has stepped up efforts to crack down fake trade aimed at bypassing foreign exchange management.

In 2013, the SAFE seized 1,082 fake documents in transit trade with a total value of $2.5 billion, Du said, noting there were companies that forged trade in order to make currency arbitrage by taking advantage of the differentiated onshore and offshore exchange and interest rates.

Though companies are free to make payment in foreign currency for goods and services, if they are found with irregular capital flows, they will be queried and those who cannot justify or prove the capital flows legitimate will be put onto black list and treated with restrictions, he said.

At present, the yuan is convertible under current account.

But some controls on foreign exchange still exist under the capital account, such as prior reviews and approvals are required for cross-border capital flows.