Capital flows and China’s RMB policy

CHINA ADVISORY - Report 22 May 2019 by Andrew Collier

The RMB is supported by Chinese capital “round-tripping”

Inward capital flows have been encouraged by Beijing through a variety of policies. These inward flows have helped to support the strength of the RMB. However, our studies suggest the majority of this capital is, in fact, institutional Chinese money “round-tripping” – going offshore and then returning. The smaller portion is foreign-owned capital. According to our research, this is an “unofficial” policy of the state to support the currency by asking domestic funds to participate in the Chinese markets.

Meanwhile, wealthy, private investors are moving money the other way – out of China. This outward flow reflects broader concerns among local elites about the future stability of China’s political system and the strength of the economy.

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