China – measuring capital flight

Whichever method you use to measure capital flight from China the story is similar; around $100bn of cash is heading for the door every month. The reality is that gradual depreciation is a difficult strategy to execute once communicated to participants who all want to exit. We remain short the renminbi and expect a currency depreciation of at least 12-15% versus the US dollar in 2016. The risk is skewed to a more extreme and disorderly adjustment if faltering economic growth and the temptation of a one-way bet leads all those looking to jump ship to board the same junk at the same time.

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