According to figures released yesterday by Bloomberg Intelligence (VPN required), China's capital outflow spiked to USD one trillion in 2015, up seven times from USD134.3 billion in 2014. In September alone, an estimated USD194.3 billion left the country, followed by USD158.7 billion in December.
Mark Williams, chief Asia economist for Capital Economics Ltd. in London, asserts that the worrisome figures are down to the People's Bank being unable to "generate confidence among investors that it knows what it’s doing, or that it’s able to achieve its policy objectives."
Mitigating this outflow, China's ample foreign exchange reserves have been able to “defend against external shocks,” but according to a recent Bloomberg News Survey, the stockpile of reserves has since taken a major hit and fallen over USD513 billion last year to USD3.33 trillion, indicating that reform may well be on the horizon for policy makers.
Yuan speculators have gone so far as to say that China's reserves could drop by as much as USD200 billion for January 2016 alone.
A dramatic article recently published by Nasdaq.com suggested that talk of the Yuan's fall is "Just 'noise' among China's deeper woes" relating to policies over the structuring of China's currency evaluation. Author Andrew Browne goes on to say that continuation of "China's debt" will eventually contribute to a "financial crisis" echoing the bursting of Japan's bubble economy in the 1990s.
However, more optimistic outlooks on the economic situation come from Australian Prime Minister Malcolm Turnbull, whose country is “heavily dependent” on sales of ore, iron and coal to China. Turnbull has dismissed the recent evaluations as "bumps" on the country's road from an industry and manufacturing to a consumer and service driven economy.
Furthermore, analysts at the Boston Consulting Group have highlighted China's legions of upper-middle class shoppers under the age of 35 as being major "drivers" for China's consumer market, bringing spending up to an estimated USD6.5 trillion in sales by 2020.
[Image via news.markets]
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