What Drives China's Current Account?

What drives China’s current account? Primarily, expected real appreciation - i.e. expected rising prices of non-tradables such as housing, education and social services - and, to a lesser extent, future investment growth. This pattern suggests that factors related to China’s domestic development (and that induce firms and households to save for precautionary reasons and primarily in housing markets rather than in other assets) account for China’s persistent surpluses until the global financial crisis.