Inflows into China’s bond and equity markets will be increasingly important indicators of the pace of depreciation of China’s exchange rate in the coming years. Despite China’s inclusion in some global equity and bond indices, portfolio inflows still remain at low levels, and have not offset persistent capital outflows from diversification of household and corporate savings. Moreover, based on significant swings between bond and equity investments revealed in the Q2 2019 balance of payments statistics, foreign inflows appear to be more actively managed than passive in nature.
