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China's $175 Billion Outflow Wasn't Investor Flight: BIS

  • Companies repaying dollar debt provoked much of the flow
  • BIS dissects opinions of currency moves that spooked investors
The headquarters of the Bank for International Settlements (BIS) in are reflected in a window in Basel, Switzerland.
Photographer: Gianluca Colla/Bloomberg
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Persistent capital outflows from China since mid-2014 were probably driven more by local companies paying down their dollar-denominated debt -- in anticipation of a stronger U.S. currency -- than investors ditching assets, according to the Bank for International Settlements.

The outpouring of China’s currency “led to two different narratives,” researchers for the Switzerland-based institution said in a report Sunday. “One tells a story of investors selling mainland assets en masse; the other of Chinese firms paying down their dollar debt. Our analysis favors the second view, but also points to what both narratives miss -- the shrinkage of offshore renminbi deposits.”