Current account of the balance of payments
| English | Chinese | Pinyin |
|---|---|---|
| balance of payments | 国际收支 | guó jì shōu zhī |
| current account | 经常账户 | jīng cháng zhàng hù |
| deficit | 赤字 | chì zì |
| trade in goods | 货物贸易 | huò wù mào yì |
| trade in services | 服务贸易 | fú wù mào yì |
| remittances | 侨汇 | qiáo huì |
| surplus | 盈余 | yíng yú |
A country's financial scorecard
- Just as a household tracks money in and out, a country records every transaction with the rest of the world in its balance of payments 国际收支.
- The most-watched part is the current account 经常账户 — and a persistent deficit 赤字 makes headlines.
Current account flow
Track exports, imports and income flows into the current account.
What the current account records
- The current account records trade and income flows with the rest of the world:
- trade in goods 货物贸易 (visible) and trade in services 服务贸易 (invisible),
- primary income (wages, interest, profit from abroad),
- secondary income (transfers like aid and remittances 侨汇).
The current account has four parts: trade in goods, trade in services, primary income and secondary income
A floating exchange rate set by currency demand and supply
Which is part of the current account?
The current account records trade in goods/services, primary and secondary income.
Match each current-account component to an example.
Goods + services + primary income + secondary income make up the current account.
Surplus 盈余 and deficit
- A deficit: more money flows out (imports/payments) than in → the value of imports exceeds exports.
- A surplus: more flows in than out.
Worked example. If exports total 500 and imports total 600, the trade balance is 500 − 600 = −100 (a deficit of 100).
Exports total 500 and imports total 600. What is the trade balance (exports − imports)?
500 − 600 = −100, a trade deficit of 100.
A current account deficit means the value of imports (and other outflows) exceeds exports (and inflows).
More money flows out than in → a deficit, financed by borrowing or selling assets.
When inflows exceed outflows, the current account is in ______.
Inflows > outflows → surplus; outflows > inflows → deficit.
Why a deficit matters (or not)
- A large persistent deficit may mean uncompetitiveness or living beyond means, and must be financed by borrowing or selling assets.
- But a deficit can be sustainable if it funds productive investment, or if the financial account offsets it.
You've got it
- the current account = trade in goods + services + primary income + secondary income
- deficit = outflows exceed inflows (imports > exports); surplus = the reverse
- a deficit must be financed; it matters most if large, persistent and unproductive