China's services trade balance: tourism rebound drives deficit amid pockets of surplus

Unlike goods, where the nation runs a trade surplus with the rest of the world, China has a persistent trade deficit in services -- especially with the US. (China's services trade deficit with the US reached almost USD 8 billion in Q4 2024, accounting for 16.8% of the nation's total deficit.)

This deficit is concentrated in three main sectors: tourism, transportation and intellectual property (which covers fees and royalties for products like software and Hollywood films). On the positive side of the service trade balance, China has demonstrated competitive advantages in certain high-value-added sectors: telecom and IT services have achieved significant surpluses. In transport services, China runs a surplus with the US, demonstrating the nation's importance in logistics and supply chain management.

Tourism -- specifically, spending on outbound travel by Chinese, which outweighs spending on visits to China by foreigners -- has been the largest contributor to China's services deficit.

We've added a visualization of high-frequency (weekly) aviation data to chart this phenomenon and the strong correlation between international flights and inbound visitor numbers. As flights pick up post-pandemic, that results in increased services trade -- as evidenced by the expanding transportation surplus and shifts in the tourism deficit.