Goldman Sachs(US:GS)2025-08-11 02:58Summary of the Conference Call on China's Balance of Payments (BOP) Q2 2025 Industry Overview - The report focuses on China's Balance of Payments (BOP) data for Q2 2025, highlighting the current account surplus and capital/financial account dynamics. Key Points and Arguments Current Account Performance - China's current account surplus decreased to US$135 billion, or 2.9% of GDP in Q2 2025, down from 3.8% in Q1 2025 [2] - The goods trade surplus remained strong due to robust exports and soft imports, while the services trade deficit narrowed due to increased inbound tourism and decreased outbound tourism [2] - The income and transfer balance showed larger outflows in Q2 compared to Q1, primarily due to seasonal factors [2] Capital and Financial Account Dynamics - The capital and financial account recorded slower net outflows, with direct investment outflows at US$21 billion in Q2, down from US$34 billion in Q1 2025 [3] - Portfolio investment outflows likely accelerated, with foreign investors selling approximately US$16 billion in bonds in Q2, compared to US$27 billion in purchases in Q1 [3] - Foreign investors only purchased US$2 billion of onshore equities in Q2, down from around US$8 billion in Q1 [3] Reserve Assets and Future Projections - Reserve assets decreased by US$10 billion in Q2, compared to a US$31 billion decrease in Q1 2025 [4] - The report anticipates an increase in China's overall current account surplus to 3.4% of GDP in 2025 from 2.2% in 2024, driven by a wider goods trade surplus and a narrower services trade deficit [10] - The broad balance of payments (BBOP) is projected to rise to 2.1% of GDP in 2025 from 0.4% in 2024, supporting a positive outlook on the RMB [10] Additional Insights - The report indicates low odds of significant re-escalation in US-China trade tensions, which supports stronger-than-expected export growth [10] - The anticipated recovery in inbound tourism is expected to contribute to a slight narrowing of the services trade deficit in 2025 [10] Important but Overlooked Content - The report emphasizes the seasonal nature of the income and transfer balance, which may not be immediately apparent in quarterly comparisons [2] - The detailed breakdown of portfolio and other investment flows is expected to be released towards the end of September, which could provide further insights into investment trends [3] This summary encapsulates the essential findings and projections regarding China's BOP for Q2 2025, highlighting both current performance and future expectations.