The flood of billions of dollars out of China slowed dramatically in the second quarter, official figures showed today, despite the yuan’s persistent weakness making it less attractive to hold.
“Cross-border capital outflow pressures have gradually eased,” Wang Chunying, spokeswoman for the State Administration of Foreign Exchange (SAFE), said at a briefing.
Foreign exchange settlement data showed Chinese banks sold $49 billion more in foreign currency than they received between April and June.
That “narrowed sharply” from $124.8 billion in the January-March period, she said. The monthly figures were even more dramatic, with $12.8 billion leaving in June, down from $54.4 billion in January, she added.
Money has been flowing out of China in recent years as its growth has slowed, adding to downward pressure on its currency and making yuan-denominated assets less attractive to hold, in a vicious cycle for the world’s second-largest economy.
Authorities have tightened restrictions over cross-border money flows, including capping cash withdrawals overseas using domestic bank cards at 100,000 yuan ($ 15,000) per year from January and requiring banks to pay a 20 per cent deposit on forward sales of foreign exchange to stem speculation.
A forward sale is a commitment to sell at a predetermined price and date.
Wang insisted that capital was leaving mainly because of “continued expanding overseas investment” by Chinese firms, rather than “foreign capital withdrawing from China”.
Chinese firms have embarked on a string of high-profile overseas acquisitions.
But Beijing rattled global investors with a surprise devaluation last August, when it guided the normally stable yuan down nearly five per cent over a week, in a move largely perceived by analysts as an attempt to boost exports as economic growth slowed.
China’s gross domestic product expanded 6.9 per cent last year, its slowest in a quarter of a century, and growth further weakened to 6.7 per cent in the first half of this year.
China’s foreign exchange reserves, the world’s largest, declined for months before unexpectedly increasing in June by $13 billion to $3.21 trillion, although they are still down 20 per cent from their $4 trillion peak in 2014.