China’s yuan under pressure amid ‘unprecedented’ capital outflows following Russian invasion of Ukraine
- Investors have pulled money out of China on a huge scale even as flows to other emerging markets held up, the Institute of International Finance says
- Analysts expect fund outflows in yuan-denominated assets to remain volatile in coming weeks, raising concerns about how authorities will manage the yuan
Global investors have withdrawn money out of China on an “unprecedented” scale since Russia invaded Ukraine in late February, according to a report by the Institute of International Finance (IIF), with the yuan likely to face more pressure in coming months.
High-frequency data detected large portfolio outflows from Chinese stocks and bonds, even as flows to other emerging markets held up, the IIF wrote in a report on Thursday.
“Outflows from China on the scale and intensity we are seeing are unprecedented, especially since we are not seeing similar outflows from the rest of emerging markets,” said the IIF report.
“The timing of outflows – which built after Russia’s invasion of Ukraine – suggests foreign investors may be looking at China in a new light, though it is premature to draw any definitive conclusions in this regard.”
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According to China Central Depository & Clearing, a depository for government bonds, overseas investors’ holdings of Chinese onshore bonds fell by 67 billion yuan (US$10.5 billion) in February.
