China's current account surplus shrinks

China’s current account surplus shrank 18% year-on-year to US$29.8 billion in the first quarter of 2011, the Wall Street Journal reported, citing a statement from the State Administration of Foreign Exchange (SAFE). The figure is a significant drop from the US$102.1 billion posted in the fourth quarter of 2010. China ran a trade deficit in the first quarter of 2011 – its first quarterly deficit in seven years – thanks in part to higher prices for commodity imports. The current account gauge includes payments the trade surplus does not, including interest payments on investments. Combined with the capital account surplus, which measures net capital inflows, the figures may indicate “hot money” entering the economy, placing additional pressure on SAFE to accelerate the pace of renminbi appreciation.