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Report: China’s Total Capital Outflows Over the Past Decade at Least $964 Billion

◎ According to the National Development and Reform Commission’s (NDRC) recently published “China Foreign Investment Report,” China’s total overseas investments from 2006 to 2016 is at least $964 billion.


According to the National Development and Reform Commission’s (NDRC) recently published “China Foreign Investment Report,” China’s total overseas investments from 2006 to 2016 is at least $964 billion. Nearly 60 percent of the overseas investing took place between 2013 to 2016. Most of the money went to Hong Kong (58.2%), America (8.7%), the Cayman Islands (6.9%), and the British Virgin Islands (6.3%).

Our take:
1. When capital flight from China was at its peak, China’s Foreign Exchange Control was unable to enact currency controls on capital leaving the country through false trading, credit card shopping, and other methods. The NDRC’s figure for overseas investments represents the best estimate that the Chinese authorities have for total capital outflows from China, but this figure only comprises a fraction of the actual value of capital flight.

There is a major channel of false trading between mainland China and Hong Kong. For instance, mainland customs data indicates that goods imported from Hong Kong rose 32.4 percent in 2016, but Hong Kong customs figures state that exports to the mainland only increased 0.4 percent.

2. The NDRC report indicates that Hong Kong is the top destination for most of China’s foreign investments. But Hong Kong is a known gateway for Chinese capital to move to other countries and regions.

3. This capital flight trend is connected closely with the intensity of the top-level factional struggle in China.

For instance, Bo Xilai started promoting a “Singing Red, Striking Black” campaign in Chongqing after he took over in 2007. Bo’s Maoist campaign was in part preparation for a political coup. In 2008, China’s foreign investments immediately doubled from the previous year.

Shortly after taking office in 2012, Xi Jinping launched an anti-corruption campaign which is chiefly aimed at the Jiang Zemin faction. In 2016, China’s foreign investments was 1.23 times the 2012 figure.

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