Recently, the State Administration of Foreign Exchange released preliminary data on the balance of payments for the fourth quarter and full year of 2022. Data shows that China's international balance of payments will be basically balanced in 2022. Among them, the current account surplus was 417.5 billion US dollars, second only to the historical high in 2008, an increase of 32% compared to 2021. The ratio of the surplus size to the gross domestic product (GDP) of the same period was 2.3%, continuing to be in a reasonable equilibrium range; Direct investment continues to generate net inflows, and cross-border capital flows are generally rational and orderly.
Specifically, firstly, the trade surplus in goods and the scale of imports and exports have both reached historic highs. In 2022, China's goods trade will maintain growth. The goods trade surplus in the international balance of payments caliber was 685.6 billion US dollars, an increase of 22% compared to 2021, and the scale of the surplus reached a historical high. Among them, the export of goods trade reached 3.4 trillion US dollars, an increase of 5%; Imports amounted to 2.7 trillion US dollars, an increase of 1%, and the scale of imports and exports also reached a historic high.
Secondly, the service trade deficit has narrowed. In 2022, China's service trade deficit was 94.3 billion US dollars, a decrease of 6% compared to 2021. Among them, the deficit of intellectual property usage fees narrowed by 11%, while telecommunications, computer information services, and other commercial services showed a surplus and increased by 66% and 23% respectively, reflecting the deep integration of China's goods and services trade and the accelerated development of digital trade, driving the upgrading of high-tech service trade. In addition, the travel deficit was 107.6 billion US dollars, an increase of 14%, mainly due to the slow recovery of expenses such as studying abroad.
Once again, direct investment continues to generate net inflows. In 2022, the net inflow of direct investment was 32.3 billion US dollars. Among them, China's net outflow of outward direct investment was 158 billion US dollars, and the overall "going global" of enterprises was stable and orderly; The net inflow of direct investment in China reached 190.3 billion US dollars, reflecting China's strong attractiveness to international long-term capital in industrial and supply chains, as well as the unified national market.
In 2022, China's foreign economic sector has withstood the test of increased capital outflows and wide fluctuations in exchange rates. The current account and basic international balance of payments have performed strongly, short-term capital outflows have rapidly converged, international balance of payments has maintained independent balance, and the country's foreign exchange reserves have decreased in name but increased in reality, "said Guan Tao, Chief Economist of China Bank Securities.
As for short-term capital flows, Guan Tao said that in 2022, under the unexpected impact of the Federal Reserve's radical tightening, the risk spillover of the Russia-Ukraine conflict, the spread of domestic epidemics and other factors, China's short-term capital net outflows (mainly including securities investment, financial derivatives, and other investments) with net errors and omissions amounted to $349.8 billion. Since entering the fourth quarter, external expectations of Federal Reserve tightening have eased, US dollar indices and bond yields have declined, US stocks have rebounded, global risk appetite has increased, internal epidemic prevention policies have been optimized, real estate regulation policies have been adjusted, domestic economic recovery prospects have improved, the attractiveness of RMB assets has increased, foreign capital has returned, and the RMB exchange rate has stabilized. In this context, the net outflow of short-term capital in China was 48.2 billion US dollars in the fourth quarter of last year, a decrease of 41% compared to the previous quarter and 61% compared to the same period last year. The year-on-year growth rate of net outflow of short-term capital for the whole year decreased from 42% in the first three quarters to 4%.
In 2022, China's current account and direct investment surplus totaled 449.8 billion US dollars, which is greater than the net outflow of short-term capital during the same period, supporting China's successful resistance to short-term capital flow shocks and promoting independent balance of international payments, "Guan Tao further stated.
Looking ahead to the future, Wen Bin, Chief Economist of Minsheng Bank, believes that the international balance of payments is expected to continue to maintain a basic equilibrium pattern in 2023. The coexistence of current account pressure and financial account improvement will provide important support for the stability of the RMB exchange rate.
Wen Bin stated that from the perspective of the current account, the mismatch between domestic and international economic cycles, the weakening of external demand leading to export pressure and the rebound of domestic demand supporting imports, may result in a decrease in China's current account surplus. However, from the perspective of financial accounts, with the recovery of China's economy and the increasing confidence of the international market in our country, the direct investment surplus is expected to return to an expanding trend. The degree of inverted interest rate differential between China and the United States is expected to narrow, and the capital market will maintain healthy development and further expand opening up. The expectation of low valuation and profit recovery will attract more overseas investors. It is expected that the securities investment deficit will continue to narrow, and even the possibility of turning into a surplus cannot be ruled out. Overall, the international balance of payments fundamentals will support a moderate rebound in the fluctuation of the RMB exchange rate in 2023.
China's international balance of payments will continue to maintain a stable and balanced trend, and cross-border capital flows will generally continue to converge towards equilibrium, "said Pang Ming, Chief Economist and Director of Research at JLL Greater China. He predicted that China's high economic growth rate, strong endogenous driving force, good fiscal situation, stable financial system, outstanding foreign trade situation, sustained current account surplus, and reserve size ranking first in the world have laid a solid foundation for the stability of China's international balance of payments.
Pang Ming believes that China is accelerating the construction of a new development pattern, maintaining a reasonable proportion of current account surplus and gross domestic product, making cross-border trade and investment more active and convenient, maintaining rapid growth in cross-border balance of payments, orderly expanding the floating range of the RMB exchange rate, continuously enhancing exchange rate elasticity, and maintaining basic stability at a reasonable equilibrium level, providing strong resilience and enormous potential for the balance of China's international payments.
Looking ahead to 2023, although there are still many uncertain factors in the external environment, China's economy has strong resilience, great potential, and sufficient vitality. The long-term positive fundamentals will not change. With the continuous effectiveness of the package of policies and follow-up measures to stabilize the economy, the trend of economic recovery will be further consolidated, which is conducive to maintaining the basic balance of international payments in China, "said Wang Chunying, Deputy Director and spokesperson of the State Administration of Foreign Exchange.
