Renminbi volatility has intensified amid slower economic growth and mounting trade friction. This has aroused market concern about China's balance of payments. According to preliminary data from the State Administration of Foreign Exchange，the nation had a current account deficit of US$28.3 billion in the first half of the year while there was a US$78.4 billion surplus on the non-reserve capital account (including net errors and omissions) in the same period. Foreign exchange reserves，excluding the impact of valuation，increased by US$49.4 billion over those six months.

What conclusions can be drawn from that first half deficit and what can we expect for the full year for the current account and overall balance of payments? What measures need to be taken to prevent balance of payments risks? The following article attempts to answer those questions.

A Basic Balance

The current account deficit reveals an external economic imbalance. In theory，the size of the current account position as measured against the gross domestic product is an important indicator that can be used to determine whether a country's external economic balance is in equilibrium. The ratio of the current account surplus ¡ª or deficit ¡ª to the GDP should therefore be kept at reasonable levels. In the first half of the year，the ratio of China's current account deficit to GDP was -0.4%，far below the international warning level of 4%.