Chinese companies and residents sent more than $110bn out of the country in January alone
Chinese companies and residents sent more than$110bn out of the country in January alone,according to new estimates, as they continued toevade tightening capital controls amid another round of market turmoil.
Surging capital outflows from China have become a source of growing concern around theworld and left Beijing scrambling to support its currency. Recently-released data showed thecountry’s foreign exchange reserves falling to their lowest level in almost four years in January.
In the first significant attempt to digest the capital flight amid January’s market turmoil in China, the Institute for International Finance estimated that $113bn had been sent out of thecountry in the month.
That was more than in any month bar two in 2015, when it estimated a total of $637bn leftChina, down slightly from the estimate of $676bn it released last month. It also marked the22nd month in a row of net outflows.
The IIF is a Washington-based industry group that represents banks and insurers around theworld. Its estimates are based on extrapolations from official Chinese data and it cautioned thatits January figures amounted to only “an approximation of the magnitude of capital flows”.
But the IIF’s figures shine a light on the extent of capital flight as they endeavour to capturefunds leaving the country through unofficial channels, such as over-invoicing for exports andother methods used to circumvent official capital controls.
“If anything, it looks too low,” said Mansoor Mohi-uddin, senior market strategist at RBS inSingapore, referring to the IIF’s estimate for January. “With FX reserves falling at $100bn amonth it appears increasingly likely the central bank will allow the [renminbi] to slide lower againtowards 7.00 against the dollar.”
The IIF’s economists said that, based on recently-released official reserve data, they estimatedthat the Chinese government had spent $90bn intervening to prop up its currency in January.