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China's capital flight unlikely

(People's Daily Online)

08:26, August 03, 2012

China's current account surplus widened to 59.7 billion U.S. dollars in the second quarter, while its capital and financial account slipped into a deficit of 71.4 billion U.S. dollars, according to statistics recently published by the State Administration of Foreign Exchange (SAFE).

In the first half of the year, the country's current account surplus was 83.2 billion U.S. dollars, capital and financial account deficit was 20.3 billion U.S. dollars, and its international reserve assets increased 62.9 billion U.S. dollars, the data shows.

Does the capital account deficit indicate a capital flight from China?

A SAFE official explained that the country has suffered sporadic capital outflows in the first half of the year, but there is no sign of a massive capital withdrawal.

In theory, a current account surplus greater than the increase in foreign exchange reserves means that domestic institutions and private capital witness net exports, and China's net foreign assets are on the rise, he said.

According to statistics on cross-border transactions by domestic companies and individuals as well as foreign exchange gains and losses, the main change in China's foreign exchange situation is that domestic institutions and individuals rather than the central bank have increased their holdings of foreign exchange assets. There are few signs of a capital flight from China, the official said.

Read the Chinese version at: 外资主动撤离迹象尚不明显, Source: People's Daily

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