China Stops Reporting Key Data Showing Size Of Its Capital Outflows

Tyler Durden's picture

When it comes to following China's capital outflows, the traditional place to keep track has been China's official reserve data released monthly, which however as we showed previously can and often is manipulated to give the impression of generally smalle numbers. We noted one example in October when China disclosed an official outflow of $43 billion, yet this number was largely incomplete, and short of the total, due to the PBOC's recent adoption of using currency forwards to manipulate the Yuan, something not tracked by the official reserve number.

This is what Goldman said at the time about a relatively more reliable data set which provides a more accurate snapshot of China's capital position:

In our view, a preferred gauge of FX-RMB conversion trend amongst onshore non-banks would be SAFE data on banks’ FX settlement on behalf of their onshore clients (to be out on October 22nd). That report captures banks' FX transactions vis-à-vis non-banks through both spot and forward transactions (for August this data showed an FX outflow of $178bn). But to assess the overall FX-RMB trend, including in the offshore RMB (CNH) market, other FX data sets such as the position for FX purchase would be useful supplements—these are not affected by valuation effects and include FX settlement between the onshore banking system and offshore banks, although they do not account for forward transactions. Data on the position for FX purchase covering the PBOC should be out on October 14, and similar data covering the whole onshore banking system (PBOC plus banks) should be released at around the same date, although this is not completely clear.

It appears that China has finally figured out this loophole to track the PBOC's attempts at masking the sheer size of its outflows, because as SCMP reported overnight, "sensitive data is missing from a regular central bank report in China amid concerns about the flow of cash out of the country as its economy slows and currency weakens."

FT adds that the People’s Bank of China removed the data category “Position for forex purchase”, which tracked total foreign exchange purchases by both the central bank and other financial institutions. In its place, a separate series that captures only central bank forex purchases is substituted. A rise in forex purchases is considered a sign of capital inflows, while a drop suggests outflows.

More from SCMP:

Financial analysts say the sudden lack of clear information makes it difficult for markets to assess the scale of capital flows out of China.

 

Figures on the “position for forex purchase” are regularly published in a monthly report issued by the People’s Bank of China.

The data, however, is missing from its latest report on the “Sources and Uses of Credit Funds of Financial Institutions in Foreign Currencies”.

 

Another key item of potentially sensitive financial data has also been altered in the latest report.

As SCMP adds, the central bank regularly publishes data on the ‘foreign exchange purchase” position, which covers all financial institutions including the central bank. The figure was 26.6 trillion yuan (HK$31.7 trillion) in December. The data published in January, however, only gives information on forex purchases by the central bank and details the lower figure of 24.2 trillion for last month.

The report (source) and line item in question are shown below:

Why the dramatic change in what is arguable one of the most important data series about the Chinese capital situation, one which comes at a time when China has been outflowing around $100 billion every month, shringking its total reserve holdings to dangerous levels?  We don't know: SCMP writes that the press office at the People’s Bank of China bank has yet to respond to telephone calls or a faxed request for comment about the changes.

As it also adds, "the central bank has tweaked items on its financial statements before, but the latest unannounced change comes at a particularly sensitive time when Beijing is trying hard to stabilise the yuan exchange rate. It is also just a week ahead of the G20 central bankers and finance ministers meeting in Shanghai."

As a reminder, many expect that China may announce a major devaluation at the upcoming G-20 meeting, which some such as Bank of America have dubbed the "Shanghai Accord."

The result is that China's already opaque and manipulated economic picture, will become even more so:

“The central bank used a non-transparent method which makes the market unable to have a clear picture about capital flows,” said Liu Li-Gang, chief China economist at ANZ in Hong Kong.

Given current circumstances, the move will fuel more speculation that the country is under great pressure from capital outflows. It will hurt the central bank’s credibility.”

An in-house analyst at an investment bank in Beijing, who declined to be named, said the changes were technical, but reflected the central bank’s intention to hide China’s real capital flows.

As we noted above, SCMP explains that according to analysts it was common practise to calculate China’s capital outflows by looking at the gap between positions on the yuan throughout the financial system and at the central bank alone, but the changes by the central bank would make this calculation impossible.

All data related to foreign exchange released by the central bank is closely monitored by financial analysts. They often read item by item from the dozens of tables and statistics released by the People’s Bank of China to spot new trends and changes.

What makes matters worse for China is that as Xie Yaxuan, chief economist at China Merchants Securities, says the central bank was unable to conceal data as there were many ways to obtain and assess information on capital movements.

“We are waiting for more data releases such as the central bank’s balance sheet and commercial banks’ purchase and sales of foreign exchange released by the State Administration of Foreign Exchange for a better understanding of the capital movement and interpreting the motive of the central bank for such change,” said Xie.

This means that if China truly intends to cover up how much capital is fleeing the mainland on any given month, it will have to fudge, delete, adjust and otherwise manipulate virtually every other capital account series, making a complete mockery of its already laughable economic reporting.

We wonder what the IMF will have to say about this significant occlusion to a critical currency data series by the newest member of the SDR basket.

Our take on this drastic escalation to keep analysts in the dark:

  1. It confirms China is panicking about its capital outflows if it has to engage in such an unprecedented step
  2. It suggests that outflows are far worse than the official reserve data admit, which as a reminder revealed a $99 billion outflow in January, the second largest ever.

As to whether China's attempt to mask its outflows will succeed, there is perhaps a just as good gauge of Chinese capital outflow, or rather its inverse: the amount of Chinese capital inflows in the one place where it traditionally ends up: Vancouver real estate. Judging by the chart below, there is no risk of any slowdown in capital outflows out of China any time soon.

Finally, the real question is what impact on the local population, which as a reminder has over $20 trillion on deposit in local banks which are now openly plagued by soaring non-performing loans making the reality of a Chinese bail in all too real, this admission that money is flowing out at an ever faster pace will have.


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Insurrexion's picture

 

 

They must be reading ZH too.

Looney's picture

The shit is getting’ shittier.

China is now on the 5-th level of shittism and has only 2 levels left  ;-)

Looney

zeronetwork's picture

They should use US CPI for their calculation.

tc06rtw's picture

   
 …  Why the hell would anyone want THE TRUTH to be promulgated, especially to The People?
   
Just think of the gloominess and anger of billions of people ruminating on their lost incomes, lost freedoms, lost lives.  They might even give up voting!
   
Far better to generate sunny cheery PR, sunny cheery stock markets and sunny cheery anti-depressants.
   
(Maybe putting ’em in the water supply is what corroded the pipes in Flint!)
  

Durrmockracy's picture

We have Vancouver real estate and Bitcoin to tell us how those outflows are doing.

Richard Chesler's picture

When serious it gets shut up you have to - Yun Clu Chunquer

 

techpriest's picture

Dude, they are seizing passports now. It's very serious.

This doesn't cover the full scale, but is one example: http://www.nytimes.com/2015/05/15/world/asia/china-passports-xinjiang-il...

Arnold's picture

Jeese louise, if they arrest and retrain brokers for merely shorting the markets, the central planning commie chinks sure aren't gonna want mostly well informed blogs, such as Zero Hedge, to be widely available.....

Paging Mr Soros........ to the red courtesy phone please.

El Oregonian's picture

Easy-peasey. Just measure the size of the outgoing warehouse doors. When they are replaced with larger ones, you'll know their having larger outflows! Wuala!

KnuckleDragger-X's picture

I see a "complete surprise" in their future.......

FireBrander's picture

If you want to know the outflows from China, just look at the price of 900sqft Crack Shacks in LA and SF..when prices fall, outflows are declining and vice-versa...

 

Deals planned to recover illegal assets from abroad

""After the agreements are made, China will share intelligence with the US and Australia, which will also offer information to their enforcement agencies to conduct further investigations," Zhang said.

"Once law enforcement officers in the US and Australia identify illegal funds, they will immediately initiate judicial procedures to freeze and confiscate those criminal proceeds in their countries."

More than half the known corrupt Chinese officials have transferred their illegal assets offshore and escaped to the US, Canada and Australia to avoid punishment, the Ministry of Public Security said."

http://usa.chinadaily.com.cn/us/2014-12/29/content_19196310.htm

techpriest's picture

"Illegal funds" is code for "any large amount of money that can be quickly seized from people who are easy to marginalize politically."

 

Also, "corrupt" is more like "the corrupt ones that don't have enough guanxi." The ones that do may carry on playing poker and drinking Moutai.

Arnold's picture

Hey! I am resembling that remark. Me! Here in the USA.

My little bit of 401k trillions.

Fuckers, you quit looking at it like pedophiles out on a three day pass.

TradingIsLifeBrah's picture

Means China looked at how low the analyst were forecasting their actual numbers to be and China was like "wow those look pretty good, let's go with that"...

philipat's picture

A little like SGE stopped reporting weekly offtake of Gold. Then, kind of, re-considered and perhaps, maybe might now start reporting Monthly data instead? They are risking losing ALL credibility and their USD 3.2 Trillion resrves won't last long at this rate. Hope the ESF has enough left to absorb it?

Soul Glow's picture

Out of sight out of mind.

Everything is fiine!  Especially the plastic rice that's for dinner.

The Once-ler's picture

   
     That’s not rice …  that’s  soylent.

GotGalt's picture

Yep, China is fine!

Everything is fiiiiine!

Enjoy the weekend ZH'ers, crack open the good stuff.  Live today for who knows if tomorrow will ever come.

_ConanTheLibertarian_'s picture

They had better fudge it instead of removing it. Now everybody knows something is seriously going wrong.

spastic_colon's picture

exactly!  they would be better off using the BTWB theory than making it completely obvious that they're screwed.....why would they embargo stats if everything was great?

Dolus's picture

OR they went to fudge the numbers and were like "Oh shit we aren't even close to the estimates" better not report at all. 

E.F. Mutton's picture

When I was 2 years old, I would cover my eyes so no one could see me.  Same thing.

Dr. Engali's picture

At least they're honest about their dishonesty.

Insurrexion's picture

 

 

Seriously Tylers, get a fucking ZH going in China.

1.3 Billion Chinese readers, smart ass Chinese commentaries, funny fucking Chinese shit, serious truthiness, and lame fucking government trolls.

What a great fucking idea?

Up vote if you likeee.

Down vote if you are a fucking government troll.

 

(BTW I want a cut of the advertising vig.)

Fuckers.

viahj's picture

pretty sure that a sinohedge would be firewalled

Arnold's picture

Mandarin would not be the handicap,

its all those local dialects and pictograph that would kill it.

Dorkface's picture
Wo tóngyì ci xiaoxi - (I agree with this message)
pods's picture

Sweep another turd under the already bumpy rug.

Really not that surprised by this. I mean, it is China.  The land of melamine in baby formula and big screen TVs to show what the sun should look like were you able to see it through the smog.

pods

TradingIsLifeBrah's picture

Their model must have #div/0! out and they can't get it back out due to the circularity.  Whoever typed in those actual inflows number of $0 is going to the firing squad.

ghostzapper's picture

Too much smog to be able to run and find the ATMs.  Problem solved.  

conraddobler's picture

Where is that Iraqi information minister?  The world needs him now!

He needs to train a whole shitload of new generation speakers able to bald faced lie in the face of enormous evidence to the contrary.

E.F. Mutton's picture

We have a President that will be perfect for that position.  If you can wait until next January.

BigRedRider's picture

"China Stops Reporting Key Data Showing Size Of Its Capital Outflows"

 

Mum's the word...keep it under your arm.

peddling-fiction's picture

Actually it is better to withhold than to lie shamelessly.

MadVladtheconquerer's picture

When is Uncle Mao going to disclose that actual accumulative GDP is somewhere south of 6trill USD?

Now that'll get a Chinese firedrill started!

Money_for_Nothing's picture

When the USSA reports their GDP somewhere south of 7trill. Does anyone really believe the record-tax-haul 15trill BS? Look at the SS tax numbers. Number of people working going down and people working for less pay. Why aren't the people driving more cause cheaper gas? Remember when they said gas consumption always increased?

China can't get any dollars cause the people in the US (collectively) don't have any money and the banks that would loan them money can't. Cause the banks don't have any money or credit either. Collectively everyone and every business has borrowed as much as can be borrowed.

90% of the people in the US aren't needed to do anything productive. Most stuff is invisible (insurance, fees, accounting, tags, license, medical exams) or placebo (most new medicines aren't as effective as the ones they replace, they just have a bigger profit margin).

Most people don't understand that a significant portion of cancer surgeons enjoy cutting off women's breast and make a lot of money doing it. The hardest thing in the world to find today is someone who doesn't have a massive conflict-of-interest and has a sense-of-shame.

Pumpkin's picture

There.  Fixed.  Should have thought of that earlier.

maatuska's picture

If there is a Chinese guy named Ho Lee and he changes 10M Yuan to ~1,3M€. Ho Lee isn't depositing it to some account which is nominated in euros because of NIRP. So he is buying some assets like companies, property etc. What this means? It means that Chinese are buying Europian (and American) assets at a pace of ~100B euros of a month!

ImReady's picture

That's ridiculous! Everyone knows Lee is a Korean name... Jeez! 

Sorry_about_Dresden's picture

Maybe they are just running out of zeros?