BIS research indicates China capital outflows not from investor flight

Capital outflows from China since mid-2014 were likely driven by domestic firms paying down dollar-denominated debt on expectations of a stronger US dollar, rather than investors fleeing from mainland assets en masse, Bloomberg reported, citing research by the Bank for International Settlements. Researchers for the bank examined the record US$175 billion net decline in cross-border capital to China during July-September 2015 and found that only US$12 billion was from official reserves outflows. Of the US$163 billion in non-reserve outflows, reductions in yuan deposits was counted as US$80 billion in capital leaving the country, while US$34 came from Chinese firms repaying foreign-currency debt.