Small Secret of Yuan Stampede

Who's behind the exodus of capital from China? In popular imagination, it's foreign hedge funds and other investors dumping Chinese assets that caused $1 trillion of wealth to stampede out of the mainland in 2015. But a new analysis by the Bank for International Settlements points the needle of suspicion toward a more prosaic actor: the little fellow in Hong Kong, Macau, Singapore, Seoul and Taipei who's suddenly scared to park money in a yuan deposit in his neighborhood bank.

The BIS study shows how a $40 billion withdrawal of offshore renminbi deposits in just these five locations during the third quarter of last year, presumably following the Chinese central bank's nerve-rattling Aug. 11 devaluation, may have triggered twice as big a reduction in these and other overseas banks' own claims on mainland lenders. That's $80 billion gone from China in just three months, amounting to almost half the $163 billion that moved out of the People's Republic in cross-border transactions. (The People's Bank shifted a further $12 billion of its reserves to banks outside China, taking the total outflows during the quarter to $175 billion.)