Capital Outflow Is Becoming A Major Concern For China'S Economy.

In a dilemma, the Chinese government will allow the renminbi to depreciate in an orderly way and set more restrictions on outflow of capital, such as slowing the opening of the capital account.

Zhang Ming, director of the International Investment Research Institute of the world economic and Political Institute of the Chinese Academy of Social Sciences, also believes that the Fed's interest rate hike has limited impact on China's economy.

The downside pressure of China's economy is mainly from domestic factors, such as overcapacity, overstock of real estate and the decline of export competitiveness.

Yao Wei pointed out that China will use huge foreign exchange reserves to ensure that the RMB exchange rate remains stable.

According to the IMF standard, it is not seriously affected.

In mid August, China's central bank unexpectedly dominated the depreciation of the renminbi, which shocked the global market. Many people thought that the main purpose of China's move was to grab ahead of the Fed's interest rate increase.

The pressure of RMB depreciation has been accumulating for several months. If China's central bank waited until the Fed raised interest rates and released the exchange rate, then the situation would be more difficult to control.

The RMB may be disorderly depreciation, the drop is likely to be far greater than 3%, and the pressure of capital outflow is even greater.

As early as in August, the Financial Times wrote that investors in China regard capital outflow as the biggest threat to China's economy.

We can see that the speed of China's capital outflow has been very fast in 2015.

If China's economy continues to slow down, capital outflows will accelerate.

In their view, capital outflow is people's right.

A sign of diminished confidence, they warn, that capital outflows will drain liquidity from the domestic economy and increase the financing of enterprises and local governments.

Moreover, with the Federal Reserve raising interest rates approaching,

The trend of capital flows is becoming more and more important.

US interest rate hike may be from China, etc.

The absorption of funds may bring greater downward pressure on China's share price.

As Wall Street noted yesterday, China is now in a dilemma:

But efforts to shore up the renminbi will also hurt exports, which may lead to massive layoffs and complex shadow banking expansion.

No one knows how many mortgages in the warehouse have been mortgaged or how much debt the shadow banking system has.

The Financial Times quoted a commentary from a medium-sized bank trader in Shanghai, saying: "things are very complicated now.

I think the focus of the market is not just on the Fed, it's just one thing to worry about. "

China can spend about 900 billion US dollars (about 1/4) on foreign exchange intervention in the case of foreign ministry exposure.

In addition to official channels, underground banks have become an important way for all capital flows out of China.

In late August, the Ministry of Public Security announced that it would organize a nationwide action against underground banks.

Meng Qingfeng, Vice Minister of public security, said that underground banks would endanger financial security. The action will dig up upstream crimes, especially through underground banking cases, to discover major criminal activities such as financial securities, corruption and terrorist activities.