China’s services trade deficit widens as outbound tourism resumes

CHINA’S service trade deficit widened in January, data from the country’s FX regulator showed on Friday (Feb 24), as outbound tourism and spending picked up after Beijing exited from its stringent zero-Covid strategy.

The service trade deficit stood at US$15.4 billion in January, up from US$11 billion a month earlier, according to the State Administration of Foreign Exchange (SAFE).

Tourism contributed US$14.5 billion of the deficit last month, compared with US$12.5 billion in December.

Chinese people have started to make outbound trips for the first time in three years after Beijing reopened its borders in early January.

Lemon Zhang, FX strategist at Barclays, said consumption by Chinese tourists outside the country accounted for up to 85 per cent of the service deficit before the Covid-19 pandemic.

“A lower current account surplus due to weaker exports, the resumption of international tourism and likely rising domestic capital outflows poses headwinds,” Zhang said, noting the looming downside pressure on the Chinese currency.

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The yuan ended the domestic session at 6.9442 per US dollar on Friday and gave up all the gains it has booked so far this year.

In 2022, China posted a total service trade deficit of US$98.9 billion. REUTERS