OECD and IMF data on economic imbalances, focusing on the European and especially the Eurozone current account surplus in 2024, have been criticized for using outdated and distorted statistical methods. Meanwhile, China’s abnormal international balance of payments data, which mistakenly portrays its massive investment income deficit as genuine, has obscured the actual surplus.
The inaccurate data reported by China has misled these two international organizations in assessing the current world economic situation.
A recent article by the Council on Foreign Relations (CFR) points out that both the IMF and OECD are using outdated data. Since late 2024, China’s current account surplus has increased from around $400 billion to about $750 billion. Subsequently, net exports have contributed over 1.5 percentage points to China’s economic growth, while the Eurozone surplus has decreased from €420 billion to €280 billion. China’s surplus has seen a significant rise in the crucial automotive industry.
Moreover, the data has not adjusted for Ireland’s Eurozone surplus. Additionally, the charts rely entirely on China’s reported current account surplus and its abnormal investment income deficit (China is the world’s second largest investor after Germany, but it incurs a net loss of $125 billion in interest and dividends, while Germany earns a net $150 billion).
The article states that most crucially, China has altered its international balance of payments data, eliminating errors and omissions in the financial account and reducing the reported goods trade surplus from 2022.
Furthermore, China’s statistical modifications have significantly reduced the reported current account surplus. The author notes that nobody now believes China’s reported investment income deficit. Therefore, international assessment organizations evaluating global trade, savings, and investment imbalances must refer to multiple reports when analyzing Chinese data in the future.
China is the world’s second-largest creditor country, larger than Japan, yet it shows a net credit of $4 trillion in the stock table of international net investments. The reported income deficit is a staggering $125 billion, which is perplexing.
Based on rational assumptions about investment returns, various income balance sheet models constructed for China suggest it should have a $100 billion surplus. The reason is simple: China’s State Administration of Foreign Exchange’s (SAFE) foreign reserves are very close to net investments. The SAFE report indicates that return rates in the low years of foreign exchange reserves in 2010 were at 3%, so the profits should be higher now.
The adjustments made in China’s data statistics present numerous issues, such as lowering the goods trade surplus reported in the international balance of payments compared to customs data, resulting in significant discrepancies between the data before and after. SAFE has not provided a convincing explanation.
The most straightforward solution is to directly use the customs trade balance, which is traceable and easily verifiable. Some may find it simpler to use the Balance of Payments (BOP) data on goods and services trade when addressing China’s falsification of investment income accounts.
The author believes the best approach is to calculate China’s trade surplus using methods before 2021 and exclude Ireland from Eurozone data. After removing Ireland’s data, China’s goods and services trade surplus is twice that of the Eurozone, and it has grown significantly in the past five years.
Adjusting in this way will also change the comparison between China’s trade surpluses and those of the Eurozone and Germany, as Germany’s merchandise and service trade surplus is currently lower than China’s.
The author argues that China’s data adjustments are meaningless, as they aim to minimize statistical errors over time by downwardly adjusting the customs surplus in the international balance of payments. Unfortunately, despite support from the IMF’s statistics department, China insists on using the IMF-recommended method. However, China cannot avoid having its data adjustments evaluated by the IMF as a result.