Balance of Payments is a way of measuring China’s international trade and capital flows as calculated by the State Administration of Foreign Exchange (SAFE), published quarterly and frequently revised after publication. In broad terms, China follows the IMF’s standard requirements for collecting this data and is largely compiled from bank data.
This report is of all the value of all the goods and services that enter and leave China. If it crosses a border it should, in theory, be accounted for here. The reason this report is significant is because within it is contained China’s current account surplus.
The current account balance is the sum of net exports of goods and services, net primary and secondary income. As this figure has been overwhelmingly one sided in China’s favor in recent years it is consistently the source political friction, in particular with nations that run a net deficit with China.
One of the reasons why this figure is so important is that, aside from being a political football, it is one of the main factors considered when China adjusts the weighting of the ‘basket of currencies’ against which China values it’s currency. For this reason it is importance to currency markets trying to anticipate currency market movements.