UPDATE 1-China swings into capital account deficit in Q2

Tue Jul 31, 2012 12:36pm BST

BEIJING, July 31 (Reuters) - China's capital and financial account swung
into a deficit of $71.4 billion from a surplus of $56.1 billion in the first
quarter as domestic firms and residents increased their holdings of foreign
currencies amid the global turbulence, the nation's foreign exchange regulator
said on Tuesday. 
    China has suffered sporadic capital outflows since late last year as choppy
global markets have spooked investors and led them to pull funds from the
country.
    "The current situation is that domestic institutions and individuals
increase their holdings of foreign exchange assets instead of the central bank.
There is no sign yet of capital flight," the State Administration of Foreign
Exchange (SAFE) said in a statement on its website, www.safe.gov.cn.
    "As balance of payment and yuan currency approach the equilibrium and
reasonable level, it is inevitable to see cross-border capital inflow and
outflow, as well as two-way yuan currency fluctuations," it said.
     Capital account deficit in the first half was $20.3 billion.
    China's current account surplus widened to $59.7 billion in the second
quarter from $23.5 billion three months earlier, according to the SAFE.
    Current account surplus in the first half of 2012 was $83.2 billion, down 5
percent from a year earlier, the data showed. The surplus was equivalent to 2.3
percent of GDP, down from 2.7 percent in 2011, offering fresh evidence that the
world's second-largest economy is relying less on external demand.
    The surplus-to-GDP ratio has comfortably fallen below the threshold that
U.S. Treasury Secretary Timothy Geithner thought was needed to keep the global
economy well balanced.
    China's current account surplus was about 6 percent of GDP in 2009 and 10.1
percent in 2007. The steady decline has been helped by the country's solid
economic growth in recent years.
    Following is a breakdown of the balance of payments (in billions of
dollars):
                               Q22012    Q12012
                            (initial)   (final)     2011      2010      2009    
BALANCE OF PAYMENTS (A+B)       -11.7      79.6    422.8     531.4     442.0    
CURRENT ACCOUNT (A)              59.7      23.5    201.7     305.4     297.1    
 Merchandise trade               91.3      21.9    243.5     254.2     249.5    
 Services trade                 -18.7     -18.1    -55.2     -22.1     -29.4    
 Income                         -13.9      17.3    -11.9      30.4      43.3    
 Transfers                        1.0       2.5     25.3      42.9      33.7    
CAPITAL & FINANCIAL ACCOUNT(B)  -71.4      56.1    221.1     226.0     144.8    
 Capital account                    ~         ~      5.4       4.6       4.0    
 Foreign direct investment (net) 38.6      48.9    170.4     124.9      34.3    
 Securities investment              ~       9.3     19.6      24.0      38.7    
 Other investment                   ~      -3.5     25.5      72.4      67.9    
RESERVE ASSETS (C)              -11.8     -74.6   -387.8    -471.7    -398.4    
 Foreign exchange reserves      -11.2     -74.8   -384.8    -469.6    -382.1    
ERRORS & OMISSIONS (D)              ~         ~    -35.0     -59.7     -43.5
    
^ Not available.
Breakdown figures may not add up exactly due to rounding.