Chinese officials admitted to a small increase in capital outflow but see no evidence of a massive exit.
Wen Xiu and Huo kan, Caijing 18 February 2009
China’s foreign exchange watchdog said capital outflows from China increased “slightly” in the second half of 2008, but that the volume is insignificant compared with China’s foreign exchange reserves.
“There is no capital flight,” Deng Xianhong, deputy director of the State Administration of Foreign Exchange (SAFE), said at a press conference in Beijing.
Nonetheless, Deng said SAFE will step up its efforts to regulate cross-border capital movement and to crack down on irregularities.
A source close to SAFE told Caijing that SAFE’s focus has shifted to preventing capital flight from an influx of speculative funds, a headache for the financial authorities for most of the past decade. Those funds -- known as hot money – are believed to have contributed to speculative activities in property and equity markets.
China’s foreign exchange reserve grew by US $281 billion in the first half of 2008, but grew by a smaller $137 billion in the year’s second half. This is believed to be caused by the increase in capital outflow.
SAFE didn’t provide figure for the sheer size of capital outflow in 2008.
An increasing number of multinationals with operations in China have repatriated their profits to help shore up operations at home, Deng said, adding that some foreign companies have actually divested from China.
These practices have always existed but they have increased somewhat lately, he said. He did not provide figures.
“Compared to the country’s hefty foreign exchange reserves, this is not something we should worry about,” he said. “China’s economic fundamentals haven’t changed, the country’s long-term prospects are still attractive to international investors.”
China’s foreign exchange reserves grew by $420 billion in 2008, reaching $1.95 trillion by the end of the year.
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No Capital Flight from China
Chinese officials admitted to a small increase in capital outflow but see no evidence of a massive exit.
Wen Xiu and Huo kan, Caijing
18 February 2009
China’s foreign exchange watchdog said capital outflows from China increased “slightly” in the second half of 2008, but that the volume is insignificant compared with China’s foreign exchange reserves.
“There is no capital flight,” Deng Xianhong, deputy director of the State Administration of Foreign Exchange (SAFE), said at a press conference in Beijing.
Nonetheless, Deng said SAFE will step up its efforts to regulate cross-border capital movement and to crack down on irregularities.
A source close to SAFE told Caijing that SAFE’s focus has shifted to preventing capital flight from an influx of speculative funds, a headache for the financial authorities for most of the past decade. Those funds -- known as hot money – are believed to have contributed to speculative activities in property and equity markets.
China’s foreign exchange reserve grew by US $281 billion in the first half of 2008, but grew by a smaller $137 billion in the year’s second half. This is believed to be caused by the increase in capital outflow.
SAFE didn’t provide figure for the sheer size of capital outflow in 2008.
An increasing number of multinationals with operations in China have repatriated their profits to help shore up operations at home, Deng said, adding that some foreign companies have actually divested from China.
These practices have always existed but they have increased somewhat lately, he said. He did not provide figures.
“Compared to the country’s hefty foreign exchange reserves, this is not something we should worry about,” he said. “China’s economic fundamentals haven’t changed, the country’s long-term prospects are still attractive to international investors.”
China’s foreign exchange reserves grew by $420 billion in 2008, reaching $1.95 trillion by the end of the year.
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