China's Q2 current account surplus remained solid, while foreign exchange reserves increased

Overview

China's preliminary balance of payments data for Q2 2026 show that the current account surplus remained solid, net outflows in the capital and financial account narrowed, and reserve assets continued to increase. A larger goods trade surplus and a smaller services trade deficit offset the impact of increased outflows in income and transfers.

Core views

On an unadjusted basis, the current account surplus as a share of GDP edged down from 3.8% in Q1 to 3.7%, but rose from 3.7% to 4.2% on a seasonally adjusted basis. Goldman Sachs believes that although the goods trade surplus will decline slightly in 2026, a narrower services deficit, lower portfolio investment outflows, and an improving broad balance of payments will support the renminbi.

Analysis framework

Based on China's preliminary balance of payments data, the analysis breaks down current account, capital and financial account flows (including net errors and omissions), direct investment, portfolio investment, and reserve asset flows, and combines seasonal adjustment and full-year forecasts to assess external balances and factors supporting the renminbi.

Methodology notes

• Macroeconomic Balance of Payments AnalysisBalance of Payments Statement

  Current account, capital and financial account, and changes in reserve assets

  Measures the combined changes in trade, cross-border capital flows, and official reserves through the main balance of payments accounts; reserve asset flows exclude valuation changes.

• Macroeconomic ForecastingBroad Balance of Payments

  Broad balance of payments as a share of GDP

  The report evaluates the current account together with the capital and financial account to assess the potential support from external balances for the exchange rate.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Renminbi

  Improving macroeconomic external balances provide exchange-rate support

  Strengths

  The current account remains in surplus, capital outflows are slowing, reserve assets are increasing, and the broad balance of payments is expected to improve.

  Weaknesses

  The 2026 goods trade surplus and overall current account surplus are expected to decline slightly from 2025.

  Comparison

  The broad balance of payments as a share of GDP is expected to rise from 1.2% in 2025 to 1.9% in 2026.

  Risks

  Cross-border portfolio investment flows, changes in energy and electronics prices, foreign trade performance, and reserve valuation volatility could alter the assessment of external balances.

Key data

• Q2 2026 current account surplusUS$195 billion; 3.7% of GDP (unadjusted)3.8% of GDP in Q1; 4.2% of GDP in Q2 on a seasonally adjusted basis.
• Q2 2026 goods trade surplusUS$279 billionUS$247 billion in Q1.
• Q2 2026 services trade deficitUS$53 billionUS$60 billion in Q1.
• Q2 2026 net direct investment outflowsUS$12 billionNet outflows of US$9 billion in Q1.
• Q2 2026 increase in reserve assetsUS$75 billionAn increase of US$48 billion in Q1; this measure excludes valuation changes.
• 2026 trade and current account forecastGoods trade surplus at 4.9% of GDP, current account surplus at 3.5% of GDP5.4% and 3.7%, respectively, in 2025.
• 2026 broad balance of payments forecast1.9% of GDP1.2% of GDP in 2025.

Impact & implications

A solid current account surplus, slower capital outflows, and reserve accumulation indicate strong resilience in China's external accounts. Although the goods trade surplus is expected to narrow slightly for the full year, improvement in the broad balance of payments remains the core basis for Goldman Sachs to maintain its constructive view on the renminbi.

Risks

• Preliminary balance of payments data may be revised subsequently.
• Detailed breakdowns of portfolio investment and other investment are pending future publication.
• Changes in energy prices and prices of AI-related electronics and power equipment may affect import and export prices and the trade surplus.
• Changes in exchange rates, asset prices, and overseas interest rates may affect cross-border capital flows and foreign exchange reserve valuations.

What to watch

• Detailed balance of payments data on portfolio investment and other investment to be released by the end of September.
• Changes in foreign investors' net purchases and sales in the interbank bond market.
• Trends in the goods trade surplus, services trade deficit, and outflows in income and transfers.
• Whether export and import volume growth aligns with Goldman Sachs' 2026 forecasts of 7.9% and 4.4%, respectively.
• Subsequent changes in the broad balance of payments and foreign exchange reserves.