Capital Outflows and an Unfriendly Fed

The changes in China’s international payments have been significant in 2022—strong trade and portfolio inflows have shifted toward weaker exports and surging capital outflows. Foreign investment flows in China’s equity and bond markets are now the most important variable in China’s international payments, with direct implications for the exchange rate. But with rising US bond yields and the Federal Reserve hiking interest rates, Chinese securities are far less attractive, given lower returns alongside new political risks.

Posted June 30, 2022
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