China Bears Say the Capital Outflow Is Just Beginning
- Unwinding of carry trades less than halfway done, Daiwa says
- Goldman sees $100 billion outflow risk for every 1% yuan loss
China Bears: Outflow Is Just Starting
Yuan bears say this month’s rally shouldn’t be taken as a sign China’s great reversal in capital flows has finished. Goldman Sachs Group Inc. warns that any further shock depreciation will only accelerate the exit.
Daiwa Capital Markets, which predicted the outflow risks back in 2014, says less than half of the $3 trillion of dollar debt that ended up in China has been repaid. Commerzbank AG said record new yuan loans in January showed companies are raising money to repay more debt abroad. Corporate bond sales onshore have more than doubled this year, as offshore issuance in the greenback dropped about 30 percent. Goldman Sachs says there have been $550 billion of outflows in the second half of 2015, and that every 1 percent yuan weakening risks $100 billion more.