ICYMI – China’s capital outflow surges to its highest since 2016

Bloomberg (gated) report using data for April from China’s State Administration of Foreign Exchange released on Friday:

• Local firms purchased the largest amount of foreign exchange from banks since 2016 in April
• exporters held back dollar conversion
• residents snapped up foreign currencies for overseas travel

The concern driving flows is a weaker yuan given China’s low interest rate compared with that for the US dollar.

More from Bloomberg:

Goldman Sachs:

• “We expect policymakers to maintain tight control to fend off depreciation expectations” via a strong yuan fixing and offshore liquidity management, given the elevated capital outflow pressures

Hang Seng Bank China:

• “Exporters have a higher tendency to hold foreign currency instead of yuan, given the weak expectation of China’s economic growth and continuous capital outflow,”

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The fear over a weaker yuan is restraining the People’s Bank of China from rate cuts. Only today we had this:

• PBOC-backed Chinese media says China should focus policy on boosting consumer demand

This article was written by Eamonn Sheridan at www.forexlive.com.