China is witnessing massive outflows of cash from its financial markets as the yuan continues to plunge, and a major chunk of that is likely leaving under questionable circumstances.
In the first half of the year, China saw a net $101 billion in outflows from stocks, bonds, and direct investment, according to Reuters, on pace for the biggest annual investor exodus since 2016.
But China labeled $45.2 billion in outflows as “errors and omissions,” which likely indicates illegal or semi-legal channels, Reuters said.
The outflows come as the Chinese yuan has depreciated 11% against the US dollar so far this year amid the Federal Reserve’s aggressive rate-hike campaign.
But instead of hiking rates, China is setting itself apart by choosing to cut lending rates to reverse a souring economy while simultaneously dealing with a housing market crash.
The Bond Connect, which links mainland China with the more open market of Hong Kong and other global financial markets, saw outflows of $42 billion in August, up 34% from July and 19-fold since March, according to Reuters.