Capital outflows reignite debate between China bulls and bears

China’s foreign exchange reserves have dropped for four straight quarters, leading to a fresh round of warnings about capital outflows. Bearish China analysts will view capital outflows as a sign of waning confidence warning that they will drain liquidity from the domestic economy, making it harder for companies and local governments to raise funds. The opposing view will argue that moderate capital outflows are symptomatic of Chinese liberalisation and a move away from accumulating foreign reserves. The bulls see the PBOC as having multiple mechanisms to expand the money supply to replace the liquidity once created by foreign capital inflows. To read more (VIEW LINK)