China’s current account more balanced in 2012

China’s ratio of current account surplus to gross domestic output (GDP) dropped to 2.6 percent in 2012, its lowest in eight years, over more balanced foreign trade, official data showed on Wednesday.

The ratio was down 0.2 percentage points from 2011 and extended a falling streak since peaking at 10.1 percent in 2007, according to figures from the People’s Bank of China (PBOC), the country’s central bank.

China’s current account remained basically balanced, the PBOC said in a quarterly monetary policy report.

The country’s current account surplus began to surge in 2005 as the U.S. real estate and credit boom boosted the global economy and trade.

The surplus-GDP ratio reached 5.9 percent in 2005, surpassing the 4-percent mark that indicates balance of international payments, and continued to rise before retreating during the global financial crisis.

The lower ratio will ease pressure on further appreciation of Chinese currency the renminbi, or the yuan, analysts said.

There is no more room for significant appreciation of the yuan, which will continue to strengthen mildly amid two-way fluctuations this year, said Lian Ping, chief economist at the Bank of Communications.

The yuan appreciated by only 0.25 percent against the U.S. dollar in 2012, compared with an accumulated appreciation of 31.68 percent by the end of 2012 from July 2005, when China abandoned a decade-old peg to the U.S. dollar by allowing its currency to fluctuate against a basket of currencies, according to the PBOC report.

Xinhua