US 3Q current account deficit hits record while investment in China slows in Nov

The Commerce Department yesterday reported that the US current account deficit increased to US$164.7 billion in the third quarter of 2004 from a revised US$164.4 billion in the second quarter. Although this was a new record, it was less than what many economists had expected, due to a rise in payments by foreign insurance companies for hurricane-related damages. Exports were up 2.0 percent, while imports were up 2.3 percent.

The latest figures put the current account deficit at 5.6 percent of GDP.

The current account deficit, of course, means that capital has to flow to the US. This, however, has not stopped capital from flowing to China at the same time.

Yesterday, the National Bureau of Statistics of China reported that fixed-asset investment in urban areas rose 24.9 percent in November from a year earlier to 571.8 billion yuan, or US$69.1 billion, after climbing 26.4 percent in October. This represents a moderate slowdown in investment, which should please the Beijing authorities.