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

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The first three months of the year the worst quarter on record for capital outflows from China. Photo: Reuters

Published: 6:30pm, 4 May 2022

The yuan is still a long way from becoming a global reserve currency after a sharp sell-off of Chinese assets following Russia’s invasion of Ukraine, according to the International Institute of Finance (IIF).

Investors began dumping Chinese equities and bonds after the war started in late February and continued the sell-off throughout March, making the first three months of the year the worst quarter on record for capital outflows from China, the IIF said in a report on Tuesday.

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

International Institute of Finance

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.