China's Q1 2026 current account surplus pulled back, but the overall balance of payments remains supportive

Overview

This report analyzes China's preliminary Q1 2026 balance of payments data. The key conclusion is that the current account surplus eased from Q4 2025 but remained solid, the capital and financial account deficit narrowed, and reserve assets increased. Looking ahead to 2026, Goldman Sachs expects the goods trade surplus to edge lower and the services trade account to remain in deficit, but an improvement in the broad balance of payments will support the renminbi.

Core views

First, the current account surplus narrowed in Q1, mainly due to a seasonal decline in the goods trade surplus and a slight widening in the services trade deficit. Second, net outflows from the capital and financial account slowed, but direct investment and portfolio investment still showed some outflow pressure. Third, reserve assets increased materially and were above Q4 2025 levels. Fourth, Goldman Sachs raised its 2026 growth forecasts for China's export and import volumes and prices, but still expects the overall current account surplus to decline modestly.

Analysis framework

The report uses a balance of payments framework to decompose the current account, capital and financial account, and reserve asset flows, and combines quarterly data, GDP shares, goods and services trade, direct investment, portfolio investment, and broad balance of payments forecasts to assess the impact on the renminbi.

Methodology notes

• Macroeconomic balance of payments analysisBalance of Payments (BOP)

  Current account, capital and financial account, reserve assets

  By breaking down trade, services, income transfers, direct investment, portfolio investment, and changes in reserve assets, the report assesses a country's external balance structure and its potential impact on exchange rates.

• Macro FX analysisBroad Balance of Payments (BBOP)

  A comprehensive measure of the current account and core capital flows

  The report uses broad balance of payments to gauge external funding supply and demand, and interprets its improvement as more supportive for the renminbi.

Asset mapping & comparison

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

• Renminbi

  An improvement in the broad balance of payments is seen as a supporting factor

  Strengths

  BBOP is expected to rise to 1.8% of GDP in 2026, capital outflows should ease versus 2025, and reserve assets are increasing.

  Weaknesses

  The current account surplus as a share of GDP is expected to fall from 3.7% in 2025 to 3.4% in 2026, while portfolio investment remains a net outflow.

  Comparison

  Compared with 2025, current account support is slightly weaker in 2026, but capital and financial account pressure is expected to ease.

  Risks

  If portfolio outflows widen, the services trade deficit is worse than expected, or energy prices push up import costs, support for the renminbi could weaken.

• China external balance

  The current account remains the main support

  Strengths

  The goods trade surplus remains elevated, with 2026 forecasts still above USD 1 trillion.

  Weaknesses

  Services trade remains in deficit, and direct investment has been weak since 2022.

  Comparison

  The current account surplus amount in 2026 is expected to be slightly higher than in 2025, but its share of GDP is declining.

  Risks

  Export growth, import prices, FDI, and portfolio investment flows could all alter the external balance pattern.

Key data

• Q1 2026 current account surplusUSD 184 billion, or 3.8% of GDPDown from 4.5% in Q4 2025; seasonally adjusted, it was 3.9% of GDP, also below 4.3% in Q4 2025.
• Q1 2026 capital and financial account-USD 136 billionThe deficit narrowed from -USD 238 billion in Q4 2025.
• Q1 2026 direct investmentnet outflow of USD 10 billionIn Q4 2025, it was a net inflow of USD 6 billion.
• Q1 2026 reserve assetsincreased by USD 48 billionOfficial foreign exchange reserves increased by USD 7 billion over the same period, implying about a -USD 41 billion valuation effect.
• 2026 goods trade surplus forecast4.8% of GDPDown from 5.4% in 2025.
• 2026 current account surplus forecast3.4% of GDPDown from 3.7% in 2025.
• 2026 broad balance of payments forecast1.8% of GDPUp from 1.2% in 2025.

Impact & implications

In terms of asset implications, the report is relatively positive on the renminbi: although the current account surplus is edging lower and capital outflows still need to be watched, an improvement in the broad balance of payments, higher reserve assets, and an expected narrowing of portfolio outflows together provide support for the renminbi. For Chinese macro assets, external demand and cross-border capital flows remain key variables to monitor throughout 2026.

Risks

• Net portfolio outflows could be larger than expected.
• Direct investment remains weak, and the recovery in foreign capital inflows is uncertain.
• Rising energy prices could lift import prices and compress the goods trade surplus.
• If the services trade deficit widens, it could further drag on the current account.
• Valuation effects in foreign exchange reserves may cause official reserve changes to differ from reserve asset changes under the balance of payments measure.

What to watch

• The detailed breakdown of portfolio investment and other investment flows to be released at the end of June.
• Whether China's 2026 export and import volume growth can meet Goldman Sachs' revised forecasts of 7.2% and 6.8%.
• Whether the goods trade surplus as a share of GDP falls from 5.4% in 2025 to 4.8% in 2026.
• Whether portfolio outflows narrow from USD 426 billion in 2025 to USD 310 billion in 2026.
• Whether the broad balance of payments rises to 1.8% of GDP as forecast, and how the renminbi reacts to that improvement.