China: How does a strong current account support Chinese Yuan appreciation? - Standard Chartered

China’s strong current account will underpin further capital account opening, gradual CNY appreciation and an expansion of authorised channels as the country pursues Renminbi internationalisation under managed convertibility, argue Standard Chartered’s Shuang Ding and Hunter Chan. Pointing to a strengthening external position, they have raised their current account surplus forecasts for 2026 and 2027 to reflect larger goods surpluses and smaller services deficits.

Can a strong surplus underpin gradual liberalisation?

"We raise our 2026 current account (C/A) surplus forecast to 4.0% of GDP from 2.5% previously, due mainly to a larger-than-expected goods trade surplus and a smaller-than-expected services trade deficit in H1-2026."

"We expect the structural drivers of China’s external-sector strength to remain intact going forward; we therefore raise our 2027 C/A surplus forecast to 3.6% of GDP from 2.0% previously."

"China is likely to continue to gradually open up its capital account to increase the Renminbi’s usability and acceptance internationally."

"We expect the growing C/A surplus to be digested by gradual CNY appreciation and a relaxation of capital controls."

"Full convertibility does not seem to be the authorities’ goal for the CNY."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)