Why capital flows away from China - and why it may be a mistake PDF Print E-mail
Friday, 25 September 2015 15:58

Today at the forum published an article, which reported a record pace of capital outflows from China in recent years, but has just statistics without intelligence and nothing was reported about the causes of capital flight. The main reason - investors expect further devaluation of the yuan, which was very likely after the Fed did not raise rates, as I previously wrote more article on the causes of nepodnyatiya Fed rates. But a major devaluation of the yuan may not be - investors, putting out the money from China may be much to lose and this is an important reason. Over the past few years, China has developed a unique situation to invest - invest in China was more favorable than in the US because the Chinese yuan recent years, steadily grew in relation to all major currencies and the US dollar, including (Figure 1). However, after the Federal Reserve has raised in the summer of 2015, China was forced to devalue the yuan in the summer of 2015 to a record level in recent years, from that moment began the outflow of hot money from China is also at a record pace. (Figure 2) However, as I wrote earlier, in November 2015 will decide on the inclusion of the yuan in the number of reserve miroovyh currency, so large currency devaluation is not in China's interest, but sluggish growth in domestic demand and the risks of international trade require more easing financial policy in China, particularly in the monetary sphere. However, in my opinion, the People's Bank of China will be likely to rely on quantitative tools of monetary policy, RRR (reserve requirement ratio) and the reduction of interest, instead of a large devaluation of the yuan. This is due primarily to ensure the stability of the Chinese economy as a whole within the stranyy that kitayskkogo management is now a higher priority than the international competitiveness of Chinese goods, as for the last year growth vnurennih investment in China slowed down significantly (Figure 3), and the nominal depreciation of the yuan does not guarantee faster export growth, and in view of the potential occurrence of further devaluation of the yuan, the impact of such a step for Chinese exports is largely uncertain and will be possible if the US Federal Reserve would not further, not only to raise rates, but also reduce its that Fed officials do not deny, and is considered as an option.