Revisiting China's Current Account: Evidence from Recent Revisions

September 22, 2026

Revisiting China's Current Account: Evidence from Recent Revisions

Harun Alp, Sina Ates, Colin Caines, Nathan Converse, Jasper Hoek, and Eva Van Leemput

Global imbalances have returned to the forefront of policy debates, with China at the center of those discussions. China's trade surplus has reached exceptionally large levels, raising concerns about its implications for the rest of the world (de Soyres et al. 2026). Against this backdrop, accurately measuring the size of China's external surplus has become increasingly important. Following changes to China's balance of payments (BOP) methodology in 2021, a substantial gap emerged between the customs and BOP trade balances, raising questions about whether the official current account understates China's true external surplus (Setser 2024).

In this note, we discuss this gap in detail and document a new development. With the release of the 2025 fourth-quarter BOP data, Chinese authorities made historically large revisions to previously published export and import data going back to 2019. On net, these revisions slightly increased the overall current account balance in recent quarters, as BOP exports were revised up somewhat more than imports. More notably, however, the changes substantially altered the source of the discrepancy between the customs and BOP trade data. BOP exports moved much closer to customs exports, largely eliminating the previous gap between the two measures. In contrast, the discrepancy between BOP and customs imports increased substantially.

This shift is noteworthy because the remaining gap between the trade balances reported in the two datasets is now concentrated almost entirely on the import side, where ownership-based adjustments are particularly difficult to independently verify. Validating these adjustments requires information on the value of foreign-owned goods produced in China that are sold domestically-information not available from customs or partner-country trade data. As a result, the revisions make the remaining discrepancy particularly difficult for outside observers to assess.

To assess the implications of these revisions, we use China's customs trade statistics as a benchmark for the goods trade component of the BOP data. Replacing the BOP goods trade data with the customs data makes China's current account surplus roughly 0.6 percent of GDP larger than reported in the official statistics. Applying the IMF's External Balance Assessment (EBA) framework to this adjusted current account estimate and comparing it with the EBA current account norm implies that the renminbi is undervalued by approximately 24 percent relative to its medium-term fundamentals, as opposed to 20 percent when using official BOP current account data.

More broadly, our findings highlight the importance of continued examination of China's external statistics. Accurately measuring China's current account surplus is important for assessing the scale of global imbalances, evaluating exchange rate misalignment, and informing international policy discussions.

China's Goods Trade Surplus is Larger in Customs Data than in BOP Statistics

In 2021, China introduced a significant methodological change to the measurement of international trade in its BOP statistics, while leaving the historical data unchanged. According to Chinese authorities, the revisions were intended to bring China's external accounts into closer alignment with the IMF's Balance of Payments Manual, Sixth Edition (BPM6), and to better account for contract manufacturing arrangements, whereby multinational firms outsource production to China while retaining ownership of the final product.

Under the revised methodology, trade flows are recorded on an ownership basis rather than on the physical movement of goods across borders. For example, an iPhone produced under contract for Apple and sold in China is recorded as a net BOP import, even though it never crossed an international border. This classification reflects the fact the iPhone is owned by Apple, a U.S. company, and its sale therefore represents Chinese consumption of a foreign-owned product. Conversely, goods produced in China under contract for foreign firms are recorded as exports to the extent of China's domestic value added rather than at their full export value. China's implementation of the BPM6 methodology has come under scrutiny, as we discuss below.

As shown in Figure 1, the methodological change coincided with a notable divergence between China's trade surplus in customs and BOP statistics. Prior to 2021, the two measures tracked each other relatively closely. Since then, however, the BOP trade surplus has consistently remained below the customs trade surplus. By the end of 2025, the gap stood at roughly $120 billion, equivalent to about 0.6 percent of China's GDP.

China's BOP Methodology Change: Reliability Concerns

Although contract manufacturing in China provides a clear rationale for why China's measured trade surplus may be smaller under the new methodology, the resulting estimates have raised important questions about their reliability. There are two main reasons why China's implementation of the BPM6 methodology has come under scrutiny.¹

1. Absence of offsetting changes in primary income

In principle, the methodological change would be expected to generate offsetting adjustments elsewhere in the current account, particularly in the primary income balance. However, there is limited evidence of such an adjustment, and the published data lack sufficient detail to assess the impact of the methodological change.

1. Reliance on survey data that are difficult to validate externally

Prior to 2021, China's trade balance was largely measured using customs data, which can be independently verified against partner-country trade statistics. Under the revised methodology, however, the estimates rely on an enterprise survey covering roughly 13,000 large firms and reportedly accounting for about 70 percent of China's trade, with the remainder estimated using cross-border payments data. Because the underlying enterprise-level data are not publicly available, the resulting BOP trade statistics are more difficult for outside observers to independently validate.

China's Latest Revisions Raise Further Questions

These measurement issues were previously identified by Setser (2024, 2025), whose work drew greater attention to the divergence between China's customs and BOP trade statistics.

This note documents a new development. Following the release of the 2025 fourth-quarter BOP data, Chinese authorities substantially revised previously published trade components going back to 2019. As shown in Figure 2, both exports and imports were revised up. On average, the revisions raised each series by about $60 billion, with considerably larger adjustments in recent quarters: exports were revised up by nearly $120 billion and imports by about $80 billion.

The State Administration of Foreign Exchange (SAFE) identifies two methodological changes contributing to these historical revisions: improvements in the measurement of international transportation services and cross-border e-commerce. In particular, newly available enterprise survey and industry data indicated that the amount of freight costs previously deducted from goods trade had been too large. SAFE therefore revised transportation services downward and correspondingly revised goods exports and imports upward, applying the revised methodology retrospectively going back to 2019. SAFE also revised goods trade to account more fully for commissions, advertising fees, and other services associated with cross-border e-commerce platforms that had previously been netted from the value of goods transactions. SAFE notes that these adjustments largely reallocate transactions between goods and services and therefore have little effect on the overall current account balance.

While SAFE provides methodological explanations for these revisions, their magnitude is striking by historical standards. Figure 3 compares the latest changes with those in previous vintages. Earlier revisions to BOP goods exports and imports were generally small, whereas the 2025 revisions average roughly $60 billion for both series over a comparable window. By contrast, the underlying customs data were essentially unrevised across vintages (Figure A.2 in Appendix A). The unusually large BOP revisions therefore illustrate the sensitivity of China's BOP trade estimates to changes in underlying data sources and statistical methods. Earlier studies examining methodological changes to China's balance of payments statistics have also raised questions about the interpretation and reliability of the published data (Wong 2021, for example).²

More importantly, the revisions substantially changed the composition of the remaining discrepancy between China's customs and BOP trade data. The left panel of Figure 4 shows the corresponding revisions to exports. Following the 2021 methodological change, BOP exports (red dotted line) were consistently below exports reported in the customs data (gray dashed line). According to the Chinese authorities, this difference reflected the revised methodology, which records only the domestic value added associated with contract manufacturing rather than the full gross value of exported goods. The historical revisions released with the 2025 fourth-quarter BOP data, however, brought BOP exports much closer to customs exports in recent quarters (red solid line), largely eliminating the previous discrepancy between the two measures.

In contrast, BOP imports were revised upward, further widening the gap relative to customs imports. As shown in the right panel of Figure 4, following the 2021 methodological change, BOP imports (red dotted line) consistently exceeded imports reported in the customs data (gray dashed line), reflecting the adjustment for changes in foreign ownership. The historical revisions increased BOP imports further (red solid line), widening the discrepancy with customs imports.

Figure 5 compares the contributions of the export and import gaps to the overall discrepancy between China's customs and BOP trade balances before and after the 2025 historical revisions. Prior to the revisions, export and import discrepancies each accounted for roughly half of the overall gap. Following the revisions, the composition of the gap changed markedly. The import discrepancy accounts for 96.6 percent, while the export gap accounts for only 3.4 percent.

The concentration of the remaining gap in imports is noteworthy because ownership-based import adjustments are particularly difficult to corroborate using external data. Exports from China can generally be cross-checked against imports reported by trading partners. By contrast, under contract manufacturing, validating the corresponding import estimates requires information on the value of foreign-owned goods produced and sold within China-transactions that do not cross an international border and therefore cannot be observed in customs or partner-country trade data. Assessing these adjustments would instead require firm-level information on domestic sales that is generally unavailable to outside researchers.

China's Current Account: Implications for the Valuation of the Renminbi

To assess the implications of these revisions, we use China's customs trade statistics as a benchmark for the goods trade component of the BOP data. Replacing the goods trade balance in the balance of payments with the corresponding customs measure raises China's current account surplus to roughly 4.4 percent of GDP, about 0.6 percentage point of GDP above the official BOP estimate (Figure 6).

The size of China's CA balance feeds into assessments of the renminbi's (RMB) valuation under the IMF's External Balance Assessment (EBA) framework. Replacing the official current account balance with our alternative estimate in the EBA framework and comparing it to IMF's estimates of the CA norm suggests that the RMB is more undervalued than implied by the latest IMF EBA assessment.

As shown in Table 1, we begin with the IMF's 2026 Article IV assessment, which projected China's current account surplus at 3.3 percent of GDP for the end of 2025. Under the IMF's External Balance Assessment (EBA) framework, this current account balance when compared to the CA norm implied that the renminbi (RMB) was 16.4 percent undervalued.

At the time of the Article IV assessment, the current account balance was still a projection. Once the official data became available, China's reported current account surplus was 3.8 percent of GDP. Holding all other components of the EBA assessment unchanged, this higher current account surplus would imply an RMB undervaluation of roughly 20 percent.

Finally, replacing the official current account balance with our alternative estimate raises the implied undervaluation to 24.3 percent, suggesting that understating China's current account surplus materially affects assessments of the RMB's valuation.

Table 1: Chinese RMB Valuation Estimates based on IMF EBA framework

References

de Soyres, François, Ece Fisgin, Ana Maria Santacreu, Eva Van Leemput, and Kevin Vega, "China Shock 2.0: How China's Ongoing Export Surge Differs from the Early 2000s," FEDS Notes, Board of Governors of the Federal Reserve System, May 29, 2026.

Higgins, Matthew, Klitgaard, Thomas, Wong, Anna, 2019. Does a Data Quirk Inflate China's Travel Services Deficit? Liberty Street Economic Blog, August 7, 2019.

Setser, Brad W. "China's Imaginary Trade Data." Follow the Money, Council on Foreign Relations, August 14, 2024.

Setser, Brad W. "China's Massive Surplus Is Everywhere (Yet the IMF Still Has Trouble Seeing It Clearly)." Follow the Money, Council on Foreign Relations, November 12, 2025.

State Administration of Foreign Exchange (SAFE), China Balance of Payments Report 2025, 2026.

Wong, Anna. Capital Flight: The Travel Channel. Journal of International Money and Finance 117, October 2021.

Appendix

A. Additional Figures

B. Background on Changes in the Measurement of China's Trade Surplus in BOP

• The fundamental difference between the old and new methodology lies in when trade is recorded.
  • Under the traditional customs-based accounting system, imports and exports are recorded when goods physically cross China's borders, regardless of who owns them.
  • The BPM6 methodology records goods trade only when ownership transfers between residents and nonresidents, irrespective of where the physical production takes place.
• To illustrate how this methodology change affects trade statistics, consider the case of Apple's iPhone production. In this scenario, the ex-factory price is $60, while the wholesale price is $100.
• When an iPhone is sold domestically in China (shown in the top two rows of Table B.1), the accounting is as follows:
  • Customs data doesn't record this transaction, since the goods never physically crossed a border.
  • Under China's implementation of BPM6, this domestic sale is recorded on an ownership-transfer basis as a net import of -$40. This breaks down into two components: a Chinese export from the factory to Apple valued at +$60, and a Chinese import from Apple to the Chinese retailer valued at - $100.
  • Consequently, iPhones produced through contract manufacturing and sold domestically in China are recorded as net imports, which narrows China's BOP trade surplus.
• When an iPhone is sold abroad (shown in the bottom two rows of Table B.1), the situation differs:
  • Customs data record this as a Chinese goods export. According to the methodology described by the Chinese authorities, the transaction was previously recorded in the balance of payments (BOP) statistics at the wholesale price of +$100, whereas under the revised methodology it is recorded at the ex-factory price of +$60.
  • Therefore, goods produced through contract manufacturing and sold abroad continue to be recorded as Chinese exports under the BOP methodology, but at the lower ex-factory price. This results in a smaller export surplus compared to the previous customs-based reporting.
• Taken together, China's extensive contract manufacturing activity means that the shift from customs-based to the new methodology reduces the measured size of China's trade surplus.

Table B.1: Examples of Recording of Contract Manufacturing in Customs and BOP

While contract manufacturing provides a clear rationale for why China's measured trade surplus may be smaller under the new methodology, Setser (2024, 2025) identifies several reasons why the resulting BOP estimates have raised questions about the reliability of China's external statistics.

• First, the change in methodology to BPM6 would be expected to generate offsetting changes in the primary income balance of China's current account.³
  • The difference between the ex-factory price ($60) and the wholesale price ($100)-in this case $40-represents value attributable to Apple's intellectual property. Under the old customs-based system, when the iPhone is sold in China, this should appear as a primary income outflow from China, since Chinese production is generating profits for foreign-owned companies. But this outflow should disappear under the BPM6 methodology, since those profits are already reflected in the higher import price it paid for the iPhone.
  • As shown in Figure B.1, however, there is limited evidence of offsetting changes in the primary income balance of the BOP. In fact, the primary income balance has become more negative. Moreover, the Chinese BOP statistics for these components of the current account lack the detail necessary to determine whether changes in these components are due to the change in methodology or to other factors.
• Second, the data used to measure China's trade balance is not publicly available and difficult to validate by external observers. With the methodological change, China switched from using customs records to an enterprise survey covering approximately 13,000 large firms and reportedly accounting for about 70 percent of total trade.⁴ A key concern is that transaction details in this survey are self-reported, making them harder to externally validate than customs-based data.