China sees 2nd month of capital outflows in July
BEIJING Aug 20 (Reuters) - China experienced capital outflows for the second consecutive month in July, data showed, suggesting its sluggish economy is still deterring investors although the pace at which money is leaving the country appears to be slowing.
China's central bank and commercial banks sold 24.5 billion yuan ($4 billion) worth of foreign exchange on a net basis in July, according to a Reuters calculation of central bank data released on Tuesday. Banks had sold 41.2 billion yuan worth of foreign exchange in June.
The world's second-biggest economy has suffered sporadic capital outflows since 2011 when it started to wobble on weak growth in exports and domestic demand. That dampened investor enthusiasm for Chinese assets and led some to exit the country.
Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai, said slower outflows in July may be a sign that investors are regaining confidence in China just as its economy shows signs of stabilising.
But Li warned investors could still pull out from China in coming months.
"China still faces pressure of capital outflows like other emerging markets in Asia. The future trend of capital flows depends on the fundamentals of China's economy," Li said.
July's capital outflows came as the yuan was trapped in a narrow trading range that month. The currency has since strengthened to hit a record high although traders say gains may have been driven central bank intervention.
The Chinese economy is in danger of suffering its worst cool down in 23 years this year by growing 7.5 percent. However, an encouraging run of data in July from factory output to trade suggested that the economy may be steadying.
Some in the market have speculated that persistent capital outflows may lead China's central bank to loosen monetary policy by reducing the level of reserves banks must hold.
However, talk of dramatic policy loosening conflicts with guidance from the central bank. Central Bank Governor Zhou Xiaochuan said this week that China would fine-tune its prudent monetary policy stance this year if needed, but expects no big adjustments.
M/M bln M/M pct
yuan Jul-13 -24.5 N/A Jun-13 -41.2 N/A May-13 66.9 -77.3 Apr-13 294.4 24.6 Mar-13 236.3 -65.4 Feb-13 295.4 -56.8 Jan-13 683.7 407.9 Dec-12 134.6 N/A Nov-12 -73.6 N/A Oct-12 21.6 -83.5 Sep-12 130.7 N/A Aug-12 -17.4 N/A Jul-12 -3.8 N/A Jun-12 49.1 109.5 May-12 23.4 N/A Apr-12 -60.6 N/A Mar-12 124.6 396.3 Feb-12 25.1 -82.2 Jan-12 140.9 N/A ($1 = 6.1229 Chinese yuan) (Reporting By Aileen Wang, Xiaoyi Shao and Koh Gui Qing; Editing by Jason Subler)