Chinese money is desperate to get out of China

Moving forward, slowly.
Moving forward, slowly.
Image: AP Photo/Andy Wong
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China is still growing at a healthy clip, China says.

But the slowdown continues, with the world’s second largest economy expanding 6.7% in the first quarter of 2016, compared to the same quarter of the prior year. That’s the slowest growth since the depths of the Great Recession back in 2009.

By the way, it’s completely within bounds to question the accuracy of the official Chinese data. After all, Chinese prime minister Li Keqiang said at an annual press conference in March that it would be “impossible” for the country of 1.4 billion people to miss its 6.5%-to-7% annual growth target.

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What’s more, stimulus spending and a borrowing boom goosed China’s GDP numbers for the quarter, a situation that many economists see as unsustainable. The most dour indicator for the future of Chinese growth is the ongoing torrent of cash flooding out the country, suggesting that many Chinese see brighter opportunities abroad, whether they be in Vancouver real estate, US corporations or off-shore tax havens.

Recently released data from the Institute of International Finance shows expected net outflows from China of roughly $530 billion in 2016, down a bit from the titanic $675 billion that zipped out last year.

That’s not just foreign money pulling out. IIF analysts forecast that the outflow of cash from China related to foreign investors will ease somewhat this year. “We expect a modest recovery in foreign inflows to China but continued substantial resident outflows,” they wrote.

If Chinese investors are voting with their feet, foreign investors would do well to take note.