Beijing, China: The exports from China have been declining with waned investments from abroad as China has experienced a net out-stream of funds in the last quarter of 2022 in the past 27 months for the first time.
According to the reports, China witnessed a net $11.2 billion move out of the country between October and December of the previous year.
Nikkei’s analysis of the data from the state administration of Foreign Exchange of the country made the numbers public, which showcases the monthly flow of funds through bank accounts.
The reports confirmed that the registered outflow constituted the largest capital outflow in China since the 2019 third quarter. In addition, cross-border inflows and outflows are also reflected by the capital account figures conducted by businesses and individuals using bank accounts in China.
Furthermore, between the period of 2014 and 2019, Net outflows were a norm for the country due to the largely anticipated depreciation of the Chinese yuan. Around the start of 2020, China started experiencing net outflows during the time the Covid-19 pandemic hit the world.
Moreover, the net influx of capital was due to the efforts of China to control the spread of the Covid-19 virus early on, along with restoring the economic conditions. China was among the first nations to recover its exports faster; the government bonds also attracted international investors looking to earn profits from the anticipated interest rate.
Supply chains running through other nations recovering from the aftereffects of the pandemic resulted in the surge of demand for Chinese exports subsiding. In the fourth quarter of 2022, exports dipped below the numbers of the previous year for the first time in two and half years, said reports.
The reports confirmed that the Chinese economy entered a long slowdown, worrying investors internationally enough to convert their investments into bonds. Such bonds were typically purchased by foreign investors through Hong Kong using channels like Bond Connect medium.
At the end of December previous year, the balance of yuan-denominated bonds held by foreigners stood at 3.38 trillion yuan ($493 billion). That balance had reduced to four straight quarters as compared to year-earlier numbers. In 2022, the balance declined to 15%, recording the first yearly drop.
Meanwhile, the balance of bonds acquired by international investors by the end of January declined by 106.5 billion yuan as compared to December’s end.
Reports concluded that if China continues to struggle to draw funds, the trend could impact the globalization of the yuan, Belt and Road financing and other initiatives to challenge the U.S.-led global order.