International Finance Association: "Russia's GDP to Decline 15% This Year... Unprecedented Capital Outflow from China"

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Bloomberg News reported on the 23rd, citing the International Institute of Finance (IIF), that unprecedented capital outflows have appeared in the Chinese market since Russia invaded Ukraine. The IIF also warned that Russia's gross domestic product (GDP) is expected to shrink by 15% this year, causing the Russian economy to regress to levels seen 15 years ago.

In a report released on the same day, the IIF diagnosed that while other emerging markets are holding up well amid the current crisis, large-scale capital is flowing out of the Chinese stock and bond markets, indicating a significant shift in capital flows in emerging markets.

Robin Brooks, Chief Economist at the IIF, stated, "In terms of scale and concentration, capital outflows from the Chinese market are at an unprecedented level," adding, "Although it may be premature to conclude, considering the timing of capital outflows coinciding with Russia's invasion of Ukraine, overseas investors' perspectives on China may have changed."

Last month, the scale of foreign investors' sales of Chinese government bonds reached an all-time high. Bloomberg reported that the net sales last month amounted to 35 billion yuan, with foreign holdings of Chinese government bonds decreasing from 2.52 trillion yuan to 2.48 trillion yuan.

Following Western sanctions freezing Russian assets, there have been forecasts that Russia might sell Chinese yuan-denominated assets to secure capital.

The Chinese stock market also showed a sharp decline earlier this month. The Shanghai Composite Index's monthly decline rate expanded to 12.7%, pushing it to the brink of breaking below the 3,000-point level.

In a separate report, the IIF stated that the Russian economy is expected to experience a sharp slowdown. Elina Ribakova, an economist at the IIF, provided a preliminary analysis of the war's impact on the Russian economy, estimating that due to Western sanctions and the withdrawal of Western companies, Russia's GDP will decrease by 15% this year and an additional 3% next year. Economist Ribakova analyzed that while the sharp drop in exports caused by sanctions may be offset by a corresponding sharp drop in imports, the steep decline in domestic demand will be the main factor driving the GDP decrease.

This content was produced with the assistance of AI translation services.