China’s capital outflows hit US$8.8 billion in October amid ‘notable shift’ by foreign investors

Outflows from Chinese equities reached US$7.6 billion last month, with US$1.2 billion removed from bond markets, according to the Institute of International Finance (IIF)

Concerns over China’s prolonged zero-Covid policy have weighed on investor sentiment this year, which has led to a series of sell-offs of yuan-denominated assets

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Outflows from Chinese equities and bonds reflect changes in sentiment over geopolitical concerns and anxiety over Beijing’s zero-Covid policy, the US-based Institute of International Finance (IIF) said on Tuesday. Photo: Bloomberg

Published: 7:15pm, 9 Nov 2022Updated: 7:25pm, 9 Nov 2022

Foreign investors pulled US$8.8 billion of funds from Chinese stocks and bonds in October, reflecting changes in sentiment over geopolitical concerns and anxiety over Beijing’s zero-Covid policy, according to the Institute of International Finance (IIF).

Outflows from Chinese equities reached US$7.6 billion last month, with the remaining US$1.2 billion removed from bond markets, the US-based IIF said on Tuesday.

There had been an outflow of just US$700 million in Chinese equities and US$1.4 billion in debt in September, according to data from the IIF.

Outflows from Chinese stocks and bonds have accelerated since Russia’s invasion of Ukraine at the end of February, which the IIF attributed to a possible realignment in emerging market capital away from China even as flows to the rest of emerging markets remained relatively robust.

This shift reflects geopolitical concerns and anxiety that the government’s zero-Covid policy could weigh on China in the medium term

IIF

China in the past decade has attracted persistent and strong capital inflows at the expense of the rest of the emerging market, the IIF said.

“Therefore, the shift to outflows in 2022 is notable and reflects lots of discussions in the asset management community,” the IIF said.

“At the time, it was an open question if outflows from China were either a short-term phenomenon or part of a more structural realignment. Increasingly, this question is being settled in favour of the latter, with market participants looking at China in a new light.