China: Net capital outflows continue at a steady pace - Natixis

Alicia Garcia Herrero, Chief Economist at Natixis, explains that their capital flow tracker points to outflows of 158USDbn in Q3 2017, slightly more than 152 USDbn in Q2 2017.

Key Quotes

“The quick reduction in outflows experienced in Q1 (which was predicted by our tracker) will probably revert in Q2, and perhaps also in Q3 based on July data.”

“However, foreign reserves have largely remained stable due to two factors. Euro has remained strong and the dollar index has continued to fall, contributing to a positive valuation effect. In addition, it can be explained by the relatively large role of RMB-denominated outflows (22%) as well as unrecorded capital outflows (mainly cash).”

“BOP data for Q1 confirms the improving trend predicted by our tracker. The official improvement is mainly explained by a surge in China’s borrowing from banks globally.”