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Capital flight out of China jumps to the fastest pace since 2015 as economy stumbles

Xi Jinping
China's President Xi Jinping looks on during a signing meeting with Maldives President Abdulla Yameen at the Great Hall of the People in Beijing, China December 7, 2017.REUTERS/Fred Dufour/Pool
  • China suffered a capital outflow of $49 billion in August, the largest since December 2015.

  • Of that amount, $29 billion fled securities investments, including a record-high exit from bonds.

  • Meanwhile, direct investment showed the steepest deficit since 2016.

China suffered a capital outflow of $49 billion last month, the largest since 2015, as the sputtering economy pushes investors toward the exits.

Of that amount, $29 billion fled securities investments, according to State Administration of Foreign Exchange data compiled by Bloomberg.

Foreign investors dumped a record-high $12 billion in mainland-listed stocks last month while also offloading Chinese bonds. August also saw a $16.8 billion deficit in direct investment, the deepest since 2016.

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Declines in the capital account were also made more severe by the tourism season, with outbound travel taking a toll on the country's services sector, according to Bloomberg. And as inbound travel to China has yet to return to previous levels, the services trade continues to suffer a deficit.

The previous time China faced outflows of this size was when markets were reeling from a surprise currency devaluation in 2015.

In the current capital exodus, Beijing has implemented some measures to prop up the yuan, such as by slashing the amount of foreign currencies banks are required to hold.

Still, China has seen a massive decline in the offshore yuan, the free-flowing version of the currency that is used in foreign markets. Weak exports and the growing attraction of US yields also helped push the yuan to a 16-month low in September.

Capital flight in China may not be turned around easily, as expectations that the country can even meet its 5% GDP target this year begin to dim.

Read the original article on Business Insider