No sign of panic as capital flow from China slows in September
Print Edition
CAPITAL outflow from China slowed in September, the country’s foreign exchange watchdog said yesterday, insisting there was no panic flight of resources amid the protracted economic slowdown.
Wang Xiaoyi, deputy head of the State Administration of Foreign Exchange, said China can keep international payments and receipts balance as the 6.9 percent year-on-year GDP growth in the first three quarters was still better than other major economies.
He said foreign investors were positive about China’s economic prospect.
China’s foreign exchange reserve has been declining for five straight months. In August, the central bank engineered a 3 percent devaluation of the yuan against the US dollar.
China’s commercial banks sold a net 729.6 billion yuan (US$114.7 billion) of foreign exchanges in September but it cooled in August to 807 billion yuan — indicating slower capital outflow.
“From the second half of last year, there has been a trend of capital outflow from China,” Wang said in a news conference in Beijing yesterday.
“There are reasons behind this kind of cross-border money flow, and it is not panic capital flight.”
Wang claimed the outflow had to do with individuals and the companies’ greater desire to hold foreign exchange, and to moves by firms which were adjusting their foreign debt structures and increasing investment abroad.
The regulator’s data showed capital inflow through trade and foreign direct investment, but outflow under capital and financial accounts.
“Such payment structure is common internationally. Japan and Germany has shown the combination of surplus and deficit for years,” Wang said.
“It is now normal for China.”
He said the market can be unreasonable at times of capital outflow and expectations for yuan’s depreciation will build up, but China’s economy was sound and the chances of more yuan depreciation was unlikely.
Wang said the August reforms in the exchange rate system to align official reference rate closer to market rate will help stabilize cross-border capital flows. He said the regulator will not put a brake on currency reforms and capital account liberation because of exchange rate volatility.
But the forex watchdog would study measures including levying a foreign exchange transaction tax, or Tobin Tax, to curb short-term speculative capital flows, Wang added.
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