Beautiful Virgin Islands

Tuesday, Jun 03, 2025

China, emerging markets suffering worst capital exodus in 7 years

China, emerging markets suffering worst capital exodus in 7 years

China and over 20 other emerging markets are undergoing their worst wave of capital exodus in around seven years, with a net total of US$4 billion withdrawn from equities and bonds combined in June, according to the Institute of International Finance (IIF).
China and over 20 other emerging markets are undergoing their worst wave of capital exodus in around seven years, a global financial industry association has warned.

Overseas investors withdrew US$2.5 billion net from Chinese bonds in June, according to data from the Institute of International Finance (IIF), while US$9.1 billion net flowed into other emerging markets’ bonds last month.

But a net total of US$4 billion was withdrawn from emerging markets’ equities and bonds combined in June, marking the fourth straight month of net losses, the Washington-based IFF said.

Overseas investors still deposited US$9.1 billion into China’s equities in June, compared with outflows of US$19.6 billion in other emerging markets, the IIF added.

“We see that the current outflow episode is similar in scale to the [yuan] devaluation scare in 2015 and 2016,” IIF economist Jonathan Fortun wrote on Wednesday after China suffered a huge foreign capital outflow from its securities markets in 2015, when around US$670 billion was withdrawn.

Fortun warned that the mounting risk of a global recession was weighing on the capital flow into emerging markets as anxiety builds over geopolitical events, tighter monetary conditions and inflation.

Foreign investors had cut their holdings of Chinese bonds for four consecutive months between February and May, representing a total outflow of around 410 billion yuan (US$61 billion), according to data from ChinaBond.com and Shanghai Clearing House.

China had suffered an “unprecedented” sell-off in late February after Russia’s invasion of Ukraine, with an estimated US$30.4 billion flowing out of its bond market in February and March alone.

Divergent monetary policies with the United States, a stronger expectation of yuan depreciation and the disruption brought on by Beijing’s zero-Covid policy have also contributed.

“The China-US rates spread … remains well below its historical average. The narrowing rate differential is likely one factor behind offshore outflows from China bonds from February to May 2022,” analysts at Nomura said on Thursday.

China’s central bank has relaxed its policy to heal the coronavirus-hit economy rather than accelerating interest rate increases like the US Federal Reserve.

The US Federal Reserve raised its benchmark interest rates by three-quarters of a percentage point in its most aggressive increase since 1994 last month, and US policymakers said on Wednesday that another 50 or 75 basis point increase could also follow later this month.

However, the People’s Bank of China is expected to maintain a moderately easing stance in the second half of the year.

“We are in a global interest rate and high inflation shock,” added Fortun.

“For the coming months, several factors will influence flow dynamics, among these the timing of inflation peaking and the outlook for the Chinese economy will be in focus.”

On Thursday, it was also confirmed China’s foreign exchange reserves fell by a more than expected US$56.5 billion from a month earlier to US$3.07 trillion at the end of June.

This marked the fifth monthly drop in 2022 and reversed a rise of over US$8 billion in May, according to data from the State Administration of Foreign Exchange (SAFE).

“Global economic growth is slowing, inflation remains high, the volatility of the international financial market is increasing, and the external environment is becoming more complex and severe,” SAFE spokeswoman Wang Chunying said.

“However … the fundamentals of [China’s economic] long-term improvement remain unchanged, which is conducive to the overall stability of foreign exchange reserves.”
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
China Accuses US of Violating Trade Truce
Panama Port Owner Balances US-China Pressures
France Implements Nationwide Outdoor Smoking Ban to Protect Children
German Chancellor Merz Keeps Putin Guessing on Missile Strategy
Mandelson Criticizes UK's 'Fetish' for Abandoning EU Regulations
British Fishing Boat Owner Fined €30,000 by French Authorities
Dutch government falls as far-right leader Wilders quits coalition
Harvard Urges US to Unfreeze Funds for Public Health Research
Businessman Mauled by Lion at Luxury Namibian Lodge
Researchers Consider New Destinations Beyond the U.S.
53-Year-Old Doctor Claims Biological Age of 23
Trump Struggles to Secure Trade Deals With China and Europe
Russia to Return 6,000 Corpses Under Ukraine Prisoner Swap Deal
Microsoft Lays Off Hundreds More Amid Restructuring
Harvey Weinstein’s Publicist Embraces Notoriety
Macron and Meloni Seek Unity Despite Tensions
Trump Administration Accused of Obstructing Deportation Cases
Newark Mayor Sues Over Arrest at Immigration Facility
Center-Left Candidate Projected to Win South Korean Presidency
Trump’s Tariffs Predicted to Stall Global Economic Growth
South Korea’s President-Elect Expected to Take Softer Line on Trump and North Korea
Trump’s China Strategy Remains a Geopolitical Puzzle
Ukraine Executes Long-Range Drone Strikes on Russian Airbases
Conservative Karol Nawrocki wins Poland’s presidential election
Study Identifies Potential Radicalization Risk Among Over One Million Muslims in Germany
Good news: Annalena Baerbock Elected President of the UN General Assembly
Apple Appeals EU Law Over User Data Sharing Requirements
South Africa: "First Black Bank" Collapses after Being Looted by Owners
Poland will now withdraw from the EU migration pact after pro-Trump nationalist wins Election
"That's Disgusting, Don’t Say It Again": The Trump Joke That Made the President Boil
Trump Cancels NASA Nominee Over Democratic Donations
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OnlyFans for Sale: From Lockdown Lifeline to Eight-Billion-Dollar Empire
Mayor’s Security Officer Implicated | Shocking New Details Emerge in NYC Kidnapping Case
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Taylor Swift Gains Ownership of Her First Six Albums
Bangkok Ranked World's Top City for Remote Work in 2025
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
×