China’s growing capital outflows could be down to asset diversification, not panic
Analysts also suggest foreign investors may have regained their appetite in yuan assets
Chinese households and companies are moving money abroad at a faster pace, with September’s estimated capital outflows hitting the highest amount since February.
But it may not be as alarming as some believe, as the outflows are partly due to more strategic factors, such as the asset diversification by households, analysts said.
China’s capital outflows may have risen to US$142 billion in the third quarter of this year, with US$43 billion in July, US$44 billion in August and forecasts US$55 billion for September, which would represent the biggest amount of capital outflow since February, according to Capital Economics.
“Our estimates suggest the latest pick-up in outflows has been driven by a step-up in purchases of foreign assets by Chinese firms and households, ” said Julian Evans-Pritchard, a China economist for Capital Economics.
He expects outbound portfolio investment in September may have reached US$17 billion, up from US$7 billion in August.
“They (Chinese households and firms) are no longer adding to FX deposits. But there has been a surge in their holdings of offshore securities, as southbound flows via the Shanghai-Hong Kong Stock Connect Scheme hit a record high last month,” he said.