Germany had a current account surplus of 2.1 of GDP at the time, while Japan s was 4.4 .

The surplus has narrowed because investment has been ramped up even higher, to roughly 49 of GDP.

China s surplus, as a percentage of GDP, has fallen, but the long term implications have yet to play out.

In 2008, the Japanese surplus was 3.2 of GDP, Germany s was 6.7 , and China s was 9.8 .

Russia s budget surplus has stood at more than 7 of GDP in the last two years, public debt has dwindled to only 8 of GDP, from 100 in 1999, and the current account surplus has averaged at 10 of GDP for the last eight years.

As a result, China s external surplus GDP ratio fell significantly in 2009.

Overall, China s trade surplus has decreased by 36 in absolute US dollar terms, and has dropped by more than half (53 ) in proportion to GDP over the past two years.

But China s current account surplus is actually less than the combined figure for Japan and Germany as a percentage of GDP, it is 5 , compared to Germany s 5.2 .

While the increase in investment reduced the saving GDP ratio, the resulting increase in imports lowered the trade surplus GDP ratio.

Italy, for example, would save up to 4 of its GDP its budget would move into surplus and fiscal stimulus would replace austerity.

Its current account surplus peaked, before the financial crisis of 2008, at around 11 of GDP.

Indeed, if foreign owned enterprises exports are deducted from the total trade volume, the surplus vanishes, because both the overall balance of merchandise trade and the balance of trade in services normally run deficits.

But Bush squandered that surplus, converting it into a deficit of 5 of GDP through tax cuts for the rich.

The picture is little better in Italy, where the current account balance has swung from a surplus of around 2 of GDP to a 3 of GDP deficit over the last ten years.

Germany s exports exceeded its imports by nearly 200 billion in the past twelve months, a surplus equivalent to nearly 6 of GDP.

But the surplus has fallen sharply in the past five years, from roughly 6 of GDP in 2007 to only 1 now.

With a trade surplus of 190 billion and the income from its nearly 3 trillion portfolio of foreign assets, China s external surplus stands at 316 billion, or 6.1 of annual GDP.

(h) Surplus

And, with growing over capacity, investment in goods production may fall even further, with serious implications for GDP.

China s large external surplus above 10 of GDP in 2007 has narrowed significantly in recent years, with the trade imbalance falling to about 2.5 of GDP.

Similarly, Indonesia s current account deficit, at 3 of GDP in 2012 2013, represents an even sharper deterioration from surpluses that averaged 0.7 of GDP in 2008 2011.

The End of China s Surplus

So the ratio of China s current account surplus to GDP is down to 4.6 , significantly below the recent peak of 11.3 , reached in 2007.

Experience suggests that China s external position is highly sensitive to global conditions, with the surplus GDP ratio rising during boom times for the world economy and falling during slumps.

And the German government s commitment to fiscal consolidation enabled it to achieve a surplus last year by 2018, the fiscal surplus is expected to amount to 1.5 of GDP.

The International Monetary Fund estimates that China s current account surplus will narrow to just 2.3 of GDP in 2012, after peaking at 10.1 in 2007.

Since China s external surplus is already down to less than 2 of GDP, a decline in domestic saving could result in China beginning to run a current account deficit.

But this excess growth has not been evenly spread.

(b) Surplus deficit position of the fund

It is also correct that if OPEC had excess capacity, it would have already used it to flush out speculators to bring oil prices down.

So it seems likely that China s current account surplus will dip below 4 of GDP before long and probably go even lower, if not turn into an outright deficit.

With the global economy recovering, China s trade surplus began to grow.

From 2005 to 2008, China s bilateral surplus with the United States increased by 41 , and its trade surplus with Europe more than doubled.

In my view, China s rebalancing is more genuine and more fundamental than the Fund recognizes, and the prediction of an eventual rebound in China s external surplus GDP ratio will most likely turn out to be wrong.

Our current world is a mix of people still subsisting with almost no external income, people generating (and consuming) surpluses, and other people consuming surpluses generated by others.

As a result, it is possible that the fall in investment growth will reverse the declining external surplus GDP ratio in 2012, unless the global economy deteriorates further and or the Chinese government launches a new stimulus package.

The excess saving could also decline if housing construction picks up.

Indeed, Keynes believed that it was surplus countries, far more than deficit countries, that posed a threat to global prosperity he went so far as to recommend a tax on surplus countries.

This adds to the surplus by increasing firms profitability.

This amounts to 4.2 of their collective GDP.

More recently, however, China has been running a large multilateral surplus as well.

Thus the budgetary surplus, if any, will not require distribution to Member States.

According to the IMF, the fall in China s current account surplus GDP ratio has largely been the result of very high levels of investment, a weak global environment, and an increase in prices for commodity imports that has outpaced the rise in prices for Chinese manufactured goods.

The overall trade balance for August 2012 was a surplus of almost 390 million for the first six months of 2012, a huge figure compared with that of 2007, which reached only 5.7 million the surplus had risen by about 425 million compared to 2006.

He testified that it is important to run surpluses to pay down the debt, but that surpluses must not be so large that the government winds up owning American industry.