Courtesy of Also Sprach Analyst.
China continued to experience money outflow in August.
The change of position of forex purchases in PBOC’s statistics and trade data implies that RMB187 billion left the country, showing no sign of slowing. Note that the PBOC do not distinguish the destination of where the money has gone, which could be hot money outflow, outbound investment, and others.
As I’ve noted before, continued money outflow does not bode well for China’s monetary conditions as the existing mechanism of base money creation is broken. However, I believe that as the ECB and the Fed are stepping in to support the economy and remove some tail risks, and there is a possibility that capital flow could become more favourable to China in the short-term. Whether this is going to be enough and how long this positive impact might have is not yet clear.
Meanwhile, the accumulation of foreign currencies deposits by Chinese, particularly non-financial corporations, continued in August.
Foreign currencies deposits of non-financial corporations rose from US$ 286.515 to US$292.984 billion in August. On a year-on-year basis, foreign deposits of non-financial corporations increased by 83.8% compared to a year ago, down only very slightly from 84.0% yoy growth in July.
Although this is not exactly an outflow, the impact on tightening monetary conditions is similar.