China: Q1 BOP Data Suggests Strong Capital Outflows - Nomura
Research Team at Nomura, notes that China’s quarterly Balance of Payment
(BOP) data showed that reserve assets fell by a significant USD123bn in
Q1 2016, larger than the USD115bn decline in Q4 2015.
“These data agree with our estimated adjusted monthly change in FX reserves, which also indicated more net outflows in Q1 (USD186bn q-o-q) than in Q4 2015 (USD170bn q-o-q). Financial account outflows (detailed breakdown not yet available) of USD171bn remain the main driver of the decline in reserve assets, while the narrower current account surplus in Q1 2016 was due to a seasonal decline in the goods surplus, as trade slowed during the lunar new year holidays.
In addition, the details on Foreign Direct Investment (FDI) lend some support to our view that domestic investors are shifting into foreign assets, which has been a source of RMB depreciation pressure. These data show a net foreign direct investment (FDI) outflow of USD23bn in Q1 2016; this is the second instance and largest of net outflows in the official quarterly data available from SAFE. Inward direct investment fell by a drastic 49.5% y-o-y in Q1 2016, which follows a decline of 6.8% in 2015. Outward direct investment growth remained elevated at 77.5% y-o-y in Q1 2016 (USD58bn), moderately higher than the 52.5% growth exhibited in 2015.”