Capital outflow within bearable range: SAFE

Outbound investment exceeded inbound in 2014

China is facing increasing pressure in capital outflow but the present amount is still within a bearable range, the State Administration of Foreign Exchange (SAFE) said on Sunday.

China has seen a continuous deficit in its capital and financial account since the second quarter of 2014, when the deficit amounted to $16.2 billion. The number shrank to $9 billion in the third quarter but again rebounded to $91.2 billion in the fourth quarter, according to a report posted by SAFE on its website.

Along with the enlarging capital outflow, growth in China's foreign exchange reserve also slowed accordingly, the data showed.

Several factors, including a strong US dollar, fast-growing outbound direct investment (ODI), as well as the enlarging deficit in services trade, have contributed to the growing capital outflow, according to Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges.

"Chinese companies' ODI will continue to grow in the short term and the deficit in services trade is also expected to expand further, which will add to the pressure in capital outflow," Xu told the Global Times on Sunday.

China's outbound investment reached $140 billion in 2014, including investment via third countries.

The number is about $20 billion higher than the foreign direct investment into China last year, making China a net outbound investor for the first time in history, official data showed in January.

Also, China's net payment in services trade reached $133.4 billion in 2014, up 25 percent over 2013, and outbound tourism has been a major contributor to the deficit, according to the SAFE report.

Looking ahead, the cross-border capital flow faces many uncertainties and the flow could fluctuate in both directions in 2015, the report said.

But experts on Sunday said that growing capital outflow does not necessarily mean that overseas investors are withdrawing their investments on a large scale.

The prospect that the US may raise its interest rate in 2015 may draw away some capital from China, but a "large-scale withdrawal of capital like what happened in Russia is unlikely to occur in China," Liu Dongliang, a senior analyst at China Merchants Bank, told the Global Times on Sunday.

SAFE also said in the report that as long as the fundamentals in the economy remain stable, it is unlikely to see systematic risks in the country's cross-border capital flow.

With the growing pressure in capital outflow, the central bank is expected to further loosen monetary policy to guarantee enough liquidity on the market, Xu said.