January 2016

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It seems at least part of the Chines capital outflows that create such havoc in the world economy (raising the specter of a substantial Chinese devaluation) are benign:

The Achilles Heel is capital flight. The authorities botched their switch from a dollar peg to a trade-weighted currency basket in August, and botched it again in December when they fleshed out the details. The result was an exodus of money in two big bursts. Both Chinese and foreign investors concluded that this was camouflage for devaluation. Fang Xinghai, a top adviser to president Xi Jinping, admitted in Davos that communications had gone horribly wrong. "We're learning," he said. He vowed that the Party is absolutely committed to the defence of its new basket. "It is the decided policy of China," he said. The facts bear him out. JP Morgan estimates that the authorities spent a record $160bn defending the yuan in December, a colossal mobilisation of resources.

Hysteria over China has become ridiculous - Telegraph

So the vital question is the scale and make-up of the capital outflows. Fresh data from the Bank for International Settlements show that the foreign liabilities of Chinese companies and investors dropped to $877bn in September from a $1.1 trillion peak in September 2014. Short-term debts have dropped from $858bn to $626bn, and have undoubtedly fallen much further over the past three months. In other words, the Chinese are paying off dollar debts and unwinding the dollar "carry trade" as fast as possible in advance of further rate rises by the US Federal Reserve. Bhanu Baweja from UBS said the repayment of foreign debts accounted for almost all the capital flight in the third quarter. It is therefore arguably harmless, potentially a one-off effect that will play itself out.

Hysteria over China has become ridiculous - Telegraph

If true, this would be very good news..