China’s money outflow back at previous rate in October after September’s blip16 November, 2012, 11:59. Posted by Zarathustra
People’s Bank of China publishes the detailed tables for monetary statistics, which contain (as usual) the numbers for working out a rough estimate for capital flow.
To our surprise, the latest numbers suggest that by such measure, money outflow continues in October, and it is almost back to the rate we saw in summer despite improvement in September. In other words, the reduction of outflow for September turns out to be a blip.
Position in forex purchases increases by RMB22 billion in October. Trade surplus for October was about US$32 billion, which translates into about RMB200 billion. As a result, the money outflow is estimated to be at RMB178.86 billion. Since October last year, money outflow is recorded by this measure for 11 out of 13 months.
This comes as a surprise for us in some ways, while somewhat expected in another way, and this comes down to how one interprets the recent strength of Chinese Yuan. We once speculated that the strength of Chinese Yuan may reflects that inflow is returning to China. The improvement for September’s data point seems to point to such direction. From an other angle, however, we have also seen that flow pattern seems to have undergone some change which might be structural or relatively permanent. If this is true, it is probably very unlikely to see any improvements in money flow (and thus liquidity), and the recent strength of Chinese Yuan, whatever the true reason is, will not last long. For the moment, the numbers support the idea that flows pattern have changed somewhat permanently.