China capital outflows to top $500 billion in 2015: IIF

LONDON (Reuters) - China will post record capital outflows in 2015 of more than $500 billion, according to a report by the Institute of International Finance (IIF).

The IIF, an authoritative tracker of emerging market capital flows, said the world’s second largest economy is likely to see $150 billion in capital outflow in the fourth quarter of the year, following the third quarter’s record $225 billion.

The estimate is based on trade data, Chinese banks’ transactions on the behalf of clients, and changes in central bank reserves, the IIF said in the report.

“The latest high-frequency indicators show that Chinese exports continued to decline for a fifth consecutive month in November, with the trade surplus narrowing to $54 billion from $62 billion in October,” the report said.

Forex reserves had fallen around $87 billion to $3.44 trillion during the month to the lowest since February 2013.

The yuan has been weakening against the dollar in recent months, mainly pressured by jitters about slowing growth in China and an expected interest rate rise in the United States.

China said on Friday it had begun issuing a yuan exchange rate against a basket of currencies to discourage investors from exclusively tracking the yuan’s fluctuations against the U.S. dollar, a move some believe signals intention to gradually shift toward a basket system.

China’s woes have had a serious impact on the rest of the developing world, with the IIF predicting that emerging markets would post net capital outflows in 2015 for the first time since 1988.

Reporting by Sujata Rao