FX.co ★ Capital flows out of China at record pace

Foreign capitals are swiftly flowing out of China. Capital outflows in 2015 topped a record high of 1 trillion US dollars. Foreign investors are hastily withdrawing funds from the country. Thus, China’s economy lost about 158.7 billion US dollars in December, which is the highest since September 2015 when capital outflows picked-up to 194 billion US dollars in just one month.

Capital flights have greatly accelerated in the wake of ambiguous statements made by the People’s Bank of China officials. Investors considered regulator’s comments on its further monetary policy to be inapt. Making such announcements, the Chinese central bank gives rise to a feeling of uncertainty, which impels foreign investors to remove their money from the country before the forecasted changes take place. In total, the capital outflow from China showed a sevenfold increase last year compared to the preceding one. Besides, experts note a decrease in China’s forex reserves, which contracted for the first time since 1992 posting a $500 billion fall in just one year.

Ongoing developments resulted in a significant devaluation of the renminbi. The exchange rate of the Chinese national currency against the greenback hit the level near 6.6 in 2016 compared to early 2015 when one US dollar was worth less than 6.1 yuans. In general, the renminbi lost in value about 8% in 2015. The People's Republic of China is unlikely to remember the last year as a good one. The GDP advanced by only 6.9% posting the worst result over the last 25 years. Considering the fact that China provides 25% of the global economic growth, there is no doubts but that its inner problems heavily affect the whole world.