No capital fright

Capital flight continues from China. This isn’t new and it’s really not a problem, despite the perception that this is one of the big “event risks”. Indeed, the scale of this outflow — which is running at 1-2% of GDP — is little more than a rounding error in the sum of the total flows going in and out of China. The intensification of the US-China cold war shouldn’t have any measurable impact on this either. The real story is that the broader weakening of the US dollar in international markets makes Beijing’s life even simpler when it comes to maintaining the CFETS basket.

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