China’s yuan ‘far from a top global reserve’, as investors dump assets amid Ukraine war
- The first three months of the year were the worst quarter on record for capital outflows from China, according to the International Institute of Finance (IIF)
- Lockdowns, yuan depreciation and perceived risk of investing in countries whose relationships with the West are complicated explain the outflows, IIF says
Outflows continued well into April, affecting both Chinese bonds denominated in foreign currencies and the yuan, the IIF said.
“The former probably reflect concerns around real estate developers. The latter were the largest and the ones where the global geopolitical background matters the most,” said the Washington-based trade group representing the financial services industry.
The yuan still seems far from a top global reserve asset
The report also looked at whether Moscow had sold its roughly US$70 billion in reserves held in Chinese assets after major Western economies froze Russian central bank assets, and whether this had contributed to the outflows.
The IIF said that while Russia might have used its yuan-denominated assets in the second half of February, large sales were less clear in March, because reserves were stable.