- China is seeing huge volumes of cash leave its financial markets as the yuan declines against the dollar.
- In the first six months of the year, China saw a net $101 billion in outflows from stocks, bonds and direct investment.
China is seeing huge outflows of cash from its financial markets as the yuan continues to depreciate, and a major chunk of that is likely leaving under questionable circumstances.
In the first six months of the year, China saw a net $101 billion in outflows from stocks, bonds and direct investment, according to Reuters, on pace for the biggest annual investor exodus since 2016.
But China labeled $45.2 billion in outflows as "errors and omissions," which likely indicates illegal or semi-legal channels, Reuters said.
The outflows come as the Chinese yuan has plummeted 11% against the US dollar so far this year amid the Federal Reserve's aggressive rate-hike campaign.
But instead of raising rates to keep up, China is setting itself apart by choosing to slash lending rates to reverse a souring economy while simultaneously contending with a housing market crash.
The overall balance of payments remains positive in China's favor as exports continue to outpace imports. But several clues are pointing to investors looking for new ways to move money out of China and get around capital controls.
The Bond Connect, which links mainland China with the more open market of Hong Kong and other global financial markets, saw outflows of $42 billion in August, up 34% from July and 19-fold since March, according to Reuters.
Meanwhile, in another potential sign of increased demand to get money out, queries about studying in Hong Kong jumped 41.5% between January and July versus a year ago.
In addition, the number of family offices in Singapore, a top destination for Chinese wealth, has soared, and purchases of dollar-denominated insurance products in Macau, which is also more open than the mainland, have gone up.