“China last year had the biggest deficit in its financial and capital account since records began in 1982 as the domestic and global economies slowed, spurring outflows of funds.
The $117.3 billion annual gap was the first since 1998 when investors deserted China during the Asian financial crisis and reversed a $221.1 billion surplus in 2011, data released on the State Administration of Foreign Exchange website showed today. The current-account excess rose to $213.8 billion in 2012 from $201.7 billion the previous year.
The deficit may reflect reduced intervention by the central bank to control the exchange rate of the yuan, which strengthened 1 percent against the dollar in 2012, the least in three years. China’s foreign-exchange reserves, the world’s largest, rose the least since 2003 last year, as the economy expanded at the weakest pace since 1999.
“This shows that China’s balance of payments is returning to a normal state,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong. “At the margin this will slow China’s rapid reserve accumulation and reduce the pressures for the yuan to appreciate further.”
The capital and financial account includes flows of funds for mergers and acquisitions, foreign direct investment, purchases and sales of equities and fixed-income securities and the central bank’s reserve account used to buy and sell foreign currencies.
