All Is Well: China Faces No Capital Flight

China faces 'no capital flight', says Commerce Ministry

China has again ruled out the possibility of massive capital outflow, saying an overwhelming majority of foreign companies that pulled out their investments in the country were shell firms, The Beijing News reported on Wednesday.

The average investment scale of those firms is relatively small, and 20 percent of them entered China less than five years ago, said the newspaper citing Tang Wenhong, head of the Department of Foreign Investment Administration of the Commerce Ministry.

Tang added that only 19 foreign companies out of the top 1,000, based on their 2010 revenue in China, have canceled their investments in the country so far, 10 of which have been turned into domestic enterprises via shares transfer.

Statistics from the ministry showed that foreign direct investment (FDI) into China stood at 273.6 billion yuan ($44.07 billion) in the first four months this year, an increase of 11.1 percent from a year earlier.

The minister is very specific about the data he cites.

FTAlphaville sees it differently: China, when a hot money outflow threatens to become a torrent

Adding the ‘errors and omissions’ deficit to recorded net hot money outflows gives an aggregate estimate of overall hot outflows or capital flight from the mainland. By construction, this slumped to a record $209.5bn ($838bn annualised) or an eye-watering 9¼% of GDP (Chart 2). Overall, in the year to Q1, China has seen capital flight of $584bn or 5.6% of GDP.