What is a Country’s Current Account Balance?

By definition, a country’s current account balance is equal to a country’s exports minus its imports. This includes not only goods, but services as well. Countries like the United States and Great Britain run a HUGE current account deficit, meaning we import a lot more than we export. On the opposite end of the spectrum are countries like China and Japan who export much more than they import. These countries are said to have a current account surplus. Since these countries who export a lot to the US are generally paid in dollars, they hold vast amounts of US dollars in their foreign currency reserves. In 2008, at the tipping point of the global financial crisis, it was estimated that China held over one trillion US dollars in their reserve. That’s $1000 for each Chinese citizen!