China’s current-account surplus has vanished

IN A CONTROL room at the headquarters of Ctrip, China’s largest online travel agency, dozens of fluorescent lines flash every second across a big digital map of the world. Each line represents an international flight sold on Ctrip’s platform. The top destinations on the morning of March 11th, when your correspondent visited, were Seoul, Bangkok and Manila. A live ranking for hotel reservations put Liverpool in first place among European cities, Merseyside’s rough-hewn charms briefly trumping Venice and Barcelona (and apparently benefiting from a special offer).

In this century’s first decade Chinese citizens averaged fewer than 30m trips abroad annually. Last year they made 150m, roughly one-quarter of which were booked via Ctrip. That is not just a boon for hotels and gift shops the world over. It is a factor behind a profound shift in the global financial system: the disappearance of China’s current-account surplus.

As recently as 2007 that surplus equalled 10% of China’s GDP, far above what economists normally regard as healthy. It epitomised what Ben Bernanke, then chairman of the Federal Reserve, called a “global saving glut”, in which export powerhouses such as China earned cash from other countries and then did not spend it. China’s giant surplus was the mirror image of America’s deficit. It was the symbol...



via The Economist: Finance and economics Business Feeds

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