Record High Capital Outflows in November

China's capital markets saw a record high outflow of US$45.7 billion in November, according to official data tracking cross-border payments. This significant movement was largely attributed to the impact of Donald Trump's US presidential election win, which caused global portfolio flows to shift.

Impact on Cross-Border Payments

The data from China's foreign exchange regulator shows cross-border receipts from portfolio investments were US$188.9 billion, while payments totaled US$234.6 billion, resulting in the largest monthly deficit on record. This deficit widened from a US$25.8 billion outflow in October, reflecting weakening investor confidence.

Policy Responses and Market Trends

Despite a series of policies announced by Beijing to stimulate the economy, the policy-driven stock market rally that started in late September is losing momentum. Meanwhile, the yuan has slumped against the dollar due to tariff threats from Trump. The Central Economic Work Conference (CEWC) pledged to increase the budget deficit, issue more debt, and loosen monetary policy.

Global and Domestic Flows

The portfolio data, released by the State Administration of Foreign Exchange (SAFE), aligns with other Chinese capital statistics showing a similar trend. Foreign institutions reduced holdings in Chinese onshore bonds for the third consecutive month in November. The Institute of International Finance (IIF) also recorded outflows in both China's bond and stock markets last month.

Impact of a Strengthening US Dollar

The strengthening of the US dollar following Trump's victory shaped portfolio flows in emerging markets including China, according to the IIF. Goldman Sachs noted significant foreign exchange outflows of US$39 billion in November, primarily from cross-border RMB outflows, likely due to RMB outflows via the portfolio investment channel.