China’s Data Still Doesn’t Add Up

This is a joint post with Michael Weilandt, Research Associate at the Council on Foreign Relations. It is a review of China’s trade data and intervention metrics for the first half of 2025.

Introduction

A strong rise in China’s goods exports in nominal terms—which maps to an even stronger increase in export volumes—drove a large expansion of China’s customs goods surplus in the first half of 2025. Nominal and real imports were weak.  

The large customs surplus in Q1 translated into a large current account account surplus in the first quarter, but something changed in the second quarter. The customs surplus increased (relative to 2024, and relative to Q1) but the current account surplus dipped for mysterious reasons.

Recall that China’s current account surplus soared in the second half of 2024. That increase reflected ongoing growth in China’s customs surplus and an unexplained reduction in the gap between the customs surplus and the balance of payments data. The gap between the customs surplus and the current account surplus remained relatively small in Q1 2025 before widening again in Q2 2025.

These kinds of unexplained swings continue to impede clear measurement of the scale of China’s internal imbalances and contribution to global trade imbalances. They further explain ongoing doubts about the size of China’s reported current account surplus. That surplus topped $600 billion in the four quarters through Q2 2025, which is almost certainly still significantly understated. A realistic estimate for the current account surplus, using China’s pre-2021 customs-based BOP methodology (which corrects for the puzzling investment income deficit) would put China’s current account surplus around $1 trillion, or about 5 percent of China’s GDP.

China’s customs (goods) surplus is on track to average a staggering $100 billion a month in 2025. For H1 2025, the customs surplus nearly reached $600 billion, $60 billion more than at this point in 2024. At $98 billion, the July surplus is in line with this trend.

A chart of the monthly customs goods surplus relative to the reported BOP goods surplus shows that the two series converged in Q1 2024, and then diverged significantly in Q2.

The Q2 monthly surpluses in the customs data averaged around $100 billion, while the surplus in goods on a BOP basis was only around $70 billion.

This gap largely reflects a lower number for balance of payments exports than for customs exports—an adjustment that is hard to square with the explanations that China has provided to the IMF (there is no evidence that the declared customs export value of smart phones, for example, is higher than the actual payments made to Hon Hai and other Apple suppliers).

As a result of the fall in the balance of payments goods surplus relative to the customs surplus in Q2, the overall goods and services surplus in the balance of payments fell—a development that cannot be explained by either the evolution in the underlying customs data or changes in the services balance.

This unexplained variance calls into question the post-2021 BOP methodology that China now uses; the adjustment between the customs and BOP numbers has not been consistent.*

State Bank Flows and Intervention Proxies

PBOC and State Bank Balance Sheet Data

In Q1, the Chinese state banks added $75 billion to their net holdings of foreign assets. That total dipped to $65 billion in Q2, but remained positive even with the “Liberation day” tariffs.

Central bank reserves—based on the PBOC balance sheet data—fell modestly in both Q1 (~$27 billion) and Q2 (~$30 billion). 

In April, the combined balance sheet (the State Banks’ foreign assets + PBOC FX Reserves) did fall (see the chart below). But there was $20 billion increase in May and a further $36 billion rise in June. The data for July shows a modest fall, which is at odds with other indicators, notably FX settlement.

Foreign Exchange Settlement

The settlement data—which captures the combined activities of the state banks and the PBOC—registered a deficit in Q1 and a surplus in Q2.

The $74 billion settlement surplus in Q2 was particularly significant, as this data point has historically been the best indicator of China’s broad activity in the foreign exchange market. It thus strongly suggests that the yuan faced appreciation pressure after China decided not to allow a significant depreciation of the yuan in the face of the “Liberation Day” tariffs. There was an additional $37 billion surplus in forward-adjusted settlement in July.

The gap between settlement and the sum of the net foreign assets of the PBOC and state banks remains puzzling and warrants further investigation. Possible explanations include accumulation of foreign assets by the policy banks, which are outside of both datasets, and/or an increase in CNY-denominated foreign assets in the state banks’ net foreign asset position.

There does seem to be a consistent pattern in the settlement data which helps explain the rise in settlement in Q2; namely that settlement has been positive in recent quarters when the onshore spot rate is close to the PBOC’s daily fix (the theoretical midpoint for daily trading).

As the next chart shows, there recently haven’t been many instances when spot has traded stronger to the fix in part because the state banks now appear to be intervening (buying FX) whenever spot it close to the fix. This new intervention pattern was covered in a previous blog.

On balance, the state banking data suggests that there is now pressure on the yuan to appreciate. Large foreign exchange sales ended in 2023. The rise in settlement suggests that China is now generally resisting appreciation pressure.

Estimating the Current Account Surplus

China reported a preliminary current account surplus of $135 billion in Q2, down from $165 billion in Q1. This brought the H1 2025 surplus to $300 billion 2025 and the reported current account surplus in the last four quarters of data to over $600 billion.

Estimates using the BOP goods methodology that China used before 2021—with a flat 3 percent return on debt assets and an 8 percent return on equities—would imply a current account surplus of over $1 trillion, or more than 5 percent of GDP.

The IMF’s spring 2025 forecast for a $365 billion calendar year 2025 Chinese current account surplus looks to be significantly off, both relative to the evolution in China’s reported surplus and relative to the evolution of China’s goods trade.

Detailed analysis of China’s data remains essential to understanding the evolution in both China’s reported data, and, more importantly, China’s true impact on global payments.

 

* In general, the new methodology has raised BOP imports relative to the old methodology—which moved cost insurance and freight to services and thus reduced goods imports—while reducing BOP goods imports relative to customs. The reasons for these adjustments have not been clearly explained; the adjustment for Apple’s “in China” activities should raise, not lower, exports, and the downward adjustment to the goods balance should be matched by an offsetting reduction in the income or services deficit.