China turned into a net capital outflow for the first time in five years last year, a report showed.
According to the annual data on overseas transactions of bank customers recently released by China’s National Exchange Service (SAFE) on the 25th, companies and individuals who opened accounts in China’s banks brought in from abroad in 2023 was $6.195.5 trillion, $68.7 billion less than the $6.264.2 trillion they sent abroad.
Net capital outflow means that there is more capital that has escaped from the home country than there is from a foreign country.
China’s net capital outflow is the first in five years since it hit $85.8 billion in 2018.
China has maintained a greater net inflow of capital from 2019 to 2022, coinciding with the COVID pandemic.
This can be attributed to regulations on travel to and from foreign countries under the “zero COVID” policy.
Each month, China’s SAFE aggregates the funds that businesses and households transact with overseas through domestic banks, publishing monthly and yearly data.
This data is known to cover trade in goods and services and investment activities, and also includes transactions through renminbi regardless of foreign currency exchange.
Japan’s Nihon Keizai Shimbun reported SAFE annual statistics and pointed out that “China’s capital outflow last year was remarkable due to direct investment such as factory construction.”
The newspaper said the statistics do not confirm whether Chinese companies or foreign-invested companies have moved funds abroad, but estimated that foreign-invested companies’ withdrawal or reduction of Chinese businesses and the escape of Chinese wealthy funds may have affected them.
Some observers say that China’s capital outflow is largely related to the slowdown in China’s economy due to various unfavorable factors such as a slump in the real estate market, sluggish domestic demand, and concerns over deflation.
In particular, the Nikkei pointed out that stock market capital outflows are particularly serious this year.
Chinese stocks have struggled in the new year, with the CSI 300 index, which consists of the top 300 stocks by market capitalization in Shanghai and Shenzhen, plunging to its lowest level in five years due to strong selling.
The British daily Financial Times (FT) reported late last month that nearly 90% of foreign investments flowing into the Chinese stock market in the last four months until December last year had been drained after self-calculating based on data from Hong Kong’s stock market-linked trading system.