June 29, 2018 / 11:06 AM / in 5 months

China reports a rare current account deficit for first quarter

BEIJING (Reuters) - China on Friday posted a final current account deficit of $34.1 billion for the first quarter of 2018, the first deficit since early 2010.

FILE PHOTO: A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

The final figure compared with a preliminary deficit of $28.2 billion, the foreign exchange regulator said in a statement.

The first quarter data comes at a time of growing worries in China about a trade war with the United States.

The quarter’s current account deficit was equivalent to 1.1 percent of gross domestic product and is still within a reasonable range, the State Administration of Foreign Exchange said on its website.

Fears of a full-scale trade war with Washington have magnified concerns about the outlook for the world's second-largest economy, fuelling a sell-off in Chinese stocks and the yuan currency CNY=CFXS.

Analysts attributed the first quarter’s rare current account deficit to China’s narrowing trade surplus and a widening services trade deficit.

“The volatile goods surplus and widening service trade deficit show that China’s current account balance could be more volatile in future,” said Tommy Xie, China economist at OCBC Bank in Singapore.

“Fundamentally, it will provide less support for the yuan,” he said

The 2017 current account surplus was equivalent of 1.3 percent of China’s gross domestic product, down from 1.8 percent in 2016, according to official data released earlier.

The ratio has been falling steadily from as high as 10 percent in 2007.

For the January-March period, China recorded a $72.5 billion surplus in its capital and financial account, compared with a preliminary surplus of $28.2 billion, the regulator said.

Reporting by Beijing Monitoring Desk and Kevin Yao, Stella Qiu; Editing by Richard Borsuk

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