Goldman Sachs said it started including yuan funds in its analysis of outflows in July, after noting that cross-border movement of the currency masked actual pressures. The bank estimates that 56 percent and 87 percent of outflows took place through the offshore yuan market in July and August, respectively. A Bloomberg gauge -- which doesn’t include direct yuan outflows -- estimates that more than $550 billion left the country this year through August.
“There have been $265 billion in net yuan outflows since last October through August, primarily due to trade settlement in yuan,” said Goldman’s Tang, citing data from the People’s Bank of China and the State Administration of Foreign Exchange. “This flow has helped lessen the overall outflow pressure faced by China because it means that importers did not have to buy as much foreign exchange to pay for imports.”
The yuan has weakened 3.1 percent against the dollar this year, the most in a ranking of Asian currencies, while a Bloomberg survey’s median estimate predicts a further decline of 0.7 percent the rest of this year. The currency traded onshore fell to 6.7051 against the dollar on Monday, the weakest since September 2010. While necessary to help an economy growing at the slowest pace since the 1990s, the Chinese currency’s weakness has exacerbated outflow pressures, which have in turn prompted the authorities to clamp down on channels of taking money out of the country.
Curbs were tightened after a yuan devaluation last year spurred an exodus of funds, while the overnight cost to borrow the offshore currency in Hong Kong surged above 20 percent twice this year amid speculation the PBOC mopped up liquidity to boost the exchange rate. The central bank last month denied it intervened.
China’s foreign-exchange reserves, the world’s largest, have hovered around the $3.2 trillion level since February, after shrinking $323 billion in four months as the PBOC sold dollars to limit declines in the yuan. The hoard declined to $3.17 trillion in September.
“We have seen a structural change in China’s capital outflows, with net outbound payments predominantly in yuan this year,” said Raymond Yeung, chief economist at Australia & New Zealand Banking Group in Hong Kong. “This relieves the pressure of yuan depreciation in the onshore market. Currency conversion is not taken place onshore. That is why we are not surprised that the foreign reserves have been preserved.”