China keeps close watch on Rmb to counter capital outflow
With as much as $34 billion leaving China in Q3 of 2011 and up to 60% of HNWIs considering leaving, Beijing is taking precautionary measures to control and regulate its currency flow. June 20, 2012 | Baron LaudermilkChina’s sustained economic performance even during the global financial crisis has fuelled hopes that it will be the new engine of growth to drive the world economy forward.. Investors all over the world, and even in Beijing, continue to invest in the country to ensure its growth; many counted on China to carry the world on its shoulders while the West scrambled to rebuild itself. Figure 1. Renminbi performance in recent years
China’s stellar economic performance in the last few years has slowed. Labour is becoming expensive, and inflation continues to ripple throughout the economy. More significantly, there is great outflow of capital from the country. Both domestic and foreign capital have been flowing out. Various questions have preyed on the minds of Beijing officials: Why is money leaving China when the country’s economy has been growing every fiscal quarter? Why are investors exiting the Chinese economy when Europe and the United States are clearly in worse situations without any real solutions in sight? And what does this mean for China’s economy and its desire to maintain high economic growth? For the first time since the 1988 Asian Financial Crisis, Beijing has recorded a decrease in its foreign exchange reserves – down from $3.2 trillion to $3.18 trillion in the final quarter of 2011. The fragile world economy is one such cause for this phenomenon, but there are also other factors at work. In a report released by Lu Ting, an economist at Bank of America Hong Kong, stated that $34 billion has flowed out of China in Q3 of 2011, driven by the speculation of a hard landing for the Chinese economy and dropping real estate prices. Wen Jiabao, the Chinese prime minster, said in February 2012 that the ta... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: China, Government Finance, Regulation, Risk and Regulation, RmbChina,Government Finance,riskregulation,Risk and Regulation,Rmb, China,Government Finance,Regulation,Risk and Regulation,Rmb, , Capital Marketscapital, Capital Markets, Keywords:Lu Ting, BofA, Wang Jiachun, Export-Import Bank Of China, China Merchants Bank, CBRC, QDII Lu Ting, BofA, Wang Jiachun, Export-Import Bank of China, China Merchants Bank, CBRC, QDII
|