China recorded capital outflow in April 2012
16 May, 2012, 11:49. Posted by Zarathustra
The detailed statistics from the April monetary statistics showed that the change in position for forex purchase has turned negative again in April.
With relatively large trade surplus in April, this indicate that capital flow turned hugely negative. We estimated that excluding trade surplus, capital outflow would be RMB177 billion (we don’t distinguish the type of flow here). As explained in the past, under the current arrangement, a capital outflow would contribute to tightening of monetary condition within China, thus we now learn more or less the reason for last weekend’s decision to reduce reserve requirement ratio. Indeed, while the 50bps cut of RRR would have made RMB421.14 billion available for banks to lend, almost half of that would have been offset by the April’s capital flow.
Source: People’s Bank of China
On top the the negative change in forex position, we can see from the latest statistics that in addition to the weakness in credit demand, new lending are dominated by shorter term loans and bills, which, as Dong Tao of Credit Suisse suggested, indicates a lack of interest in taking on longer-term debt for investment.
Source: People’s Bank of China
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About Zarathustra
Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.