Adding the ‘errors and omissions’ deficit to recorded net hot money outflows gives an aggregate estimate of overall hot outflows or capital flight from the mainland. By construction, this slumped to a record $209.5bn ($838bn annualised) or an eye-watering 9¼% of GDP (Chart 2). Overall, in the year to Q1, China has seen capital flight of $584bn or 5.6% of GDP.
That is from Richard Iley, cited by David Keohane at the FT.
By the way, here is the response of the Chinese government:
China has again ruled out the possibility of massive capital outflow, saying an overwhelming majority of foreign companies that pulled out their investments in the country were shell firms, The Beijing News reported on Wednesday.
The average investment scale of those firms is relatively small, and 20 percent of them entered China less than five years ago, said the newspaper citing Tang Wenhong, head of the Department of Foreign Investment Administration of the Commerce Ministry.
Judge for yourself…a better response would have been “this outflow is a natural process of investment diversification, as China liberalizes its capital markets gradually over time.” That doesn’t account for everything that is going on, but at least it makes potential sense.
By the way, if you ask some Chinese about India, they will mention Buddhism and people riding on the top of trains.