China’s hidden capital flight surges to record high

Net errors and omissions is a category present in balance of payments accounting to reflect flows that can’t be explained elsewhere.

Published: 11th October 2019 04:04 PM  |   Last Updated: 11th October 2019 04:04 PM   |  A+A-

Representational image of a Yuan note.

Representational image of a Yuan note.

By Bloomberg

China’s hidden capital flight surged to a record high in the first half of this year, suggesting that residents wanting to move money abroad are using unrecorded transactions to evade tight capital controls.

That’s according to the Washington-based Institute of International Finance, which said the “net errors & omissions” in China’s balance of payments, widely seen as an indicator of concealed capital flight, rose to a record high of $131 billion in the first six months of this year. That was larger than the average $80 billion recorded during the same period in 2015 and 2016, when outflow pressures intensified, it said.

Hidden Capital Flight?

Capital outflows via net errors and omissions are a record so far this year

“Resident capital continued to leave the country via unrecorded transactions,” said the IIF’s head of China research Gene Ma in an Oct. 10 note. While recorded resident outflows of $74 billion were the smallest in 10 years, “the true extent of capital flight seems underreported,” Ma wrote.

Net errors and omissions is a category present in balance of payments accounting to reflect flows that can’t be explained elsewhere. Discrepancies in tourism data can also be used to spot the practice of citizens using activities like property purchases or buying life insurance abroad to squirrel money offshore.

A separate Bloomberg measure estimating capital flows showed outflows were about $226 billion in the first seven months of this year, about 19% higher than in the same period in 2018.

While growth concerns will weigh on China’s outlook next year, Ma expects relatively balanced net flows in 2020. China’s inclusion in global stock indexes and its phased inclusion in global bond indexes from next year will continue to drive significant portfolio inflows, while the State Administration of Foreign Exchange is committed to continue financial market opening, he said.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)
TAGS
China Yuan

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp