China capital outflows rose 32% to $66b in September

Services trade deficit, FDI helped buoy capital outflows.

Standard Chartered (SC)'s China capital flows tracker shows that monthly non-FDI capital outflows accelerated to US$66b in September from US$50b each in July and August.

The trade surplus narrowed to US$42b from US$52b in August as export growth weakened. This was partially offset by the services trade deficit (estimated at US$20b) and net foreign direct investment (FDI) outflows (US$7b).

Despite an overall surplus under the current and FDI accounts (of US$15b), SC noted that the People’s Bank of China’s (PBoC’s) FX assets declined further by an amount equivalent to US$51b in September from a decline of US$29b in August, indicating increased net FX selling by the central bank. This implies, it said, non-FDI capital outflows of USD$66b in September.

The PBoC increased intervention in September to keep USD-CNY below 6.70. USD selling rose in the month on strong demand from the household sector for overseas trips before the one-week National Day holidays in early October and an accelerated pace of overseas investing by Chinese corporations, according to the PBoC.

China’s FX reserves fell US$18.8b in September, less significant than net FX selling by the PBoC in the month. PBoC officials attributed the difference to price gains in reserve assets and the appreciation of other reserve currencies against the USD.