Current Account Imbalances
Representation of the Free State of Bavaria to the European Union
When the current US administration took office, the current account surplus of China increasingly became a focus of the political debate. While the trade dispute between the governments of the US and China naturally focusd on the trade balance between these two economies, our breakfast discussion examined the development of the current account balance between China, the Euro Area and the individual member states. The Euro Area deficit in trade with goods towards China reached its maximum in 2016 and has declined slightly since. Germany has even been recording a trade surplus since 2011. We discussed some potential drivers of the trade balance, such as the real effective exchange rates, the development of domestic demand or the fiscal stance with Members of the European Parliament. Finally, we asked whether excessive imbalances exist and, if government action is needed to tackle them.