The current account is an important indicator of a country's external equilibrium，and it plays a role in shaping exchange rate expectations. In the first quarter and first half of this year，China suffered its first deficit on the current account since 2001. Although the latest data show that China had a surplus in the second quarter alone of US$5.8 billion，there is much concern over the potential for further weakening amid the growing Sino-US trade friction. This has implications for China's economy and the renminbi exchange rate.

The proportion of China's current account surplus to the gross domestic product fell from 1.8% in 2016 to 1.3% in 2017. It had a deficit equal to 1.09% of GDP in the first quarter of this year and approximately 0.43% in the first half of the year. (The current account consists of trade in goods，services，income and current transfers. In essence，due to the relatively modest amounts of income and current transfer projects，changes in the current account are essentially determined by goods and services.)

The Near Term Perspective

At present，the overseas economic prosperity is still at a high level of volatility，and there is a lagging effect from renminbi depreciation in the previous period. The export fundamentals in the second half of the year were not cause for pessimism. Merchandise exports were affected mainly by overseas demand. The latest data showed that  US economic growth in the second quarter exceeded expectations，with GDP quarter on quarter growth of 4.1%，the highest since 2014. Although economic growth in Europe and Japan has slowed，the performance of the US economy means that any slowdown in global economic growth will be delayed. The depreciation of the renminbi will promote China's export expansion in future.