China’s balance of payments data in 2017 suggest an unlikely return to “twin surpluses” under both the current and non-reserve financial accounts. However, a closer examination of the 2Q data still points to persistent capital outflows, particularly under outbound FDI and portfolio flows. Administrative measures driving a repatriation of foreign exchange previously held offshore appear to have provided temporary inflows in 2017, but probably will not persist in any significant size. The yuan will continue to face pressure to depreciate, particularly if monetary easing steps are introduced early next year.
