More Chinese are now buying luxury items online. (Photo : www.marketingtochina.com)
Several wealthy Chinese are scrambling to ship their money out of the country for fear that the 2-percent devaluation on Tuesday, Aug.11, would be the start of a long-term currency slide, despite the pronouncement by the People’s Bank of China (PBOC) that further depreciation has no basis, the Shanghai Daily reported.
Tang Wei, a businessman who is moving some of his assets out of China to fund his son's schooling in Canada next year, said that he lost several hundred thousands of yuan from the devaluation.
Data from the Boston Group Consulting showed that there are now about four million households in China with private wealth of at least $1 million.
The report said that private bankers had already made investments overseas due to the stock market turmoil last month, which would have added to the capital outflows triggered by expectations that the U.S. will raise interest rates by year-end.
Between the third quarter of last year and the end of the second quarter of this year, JPMorgan analysts said that about $235 billion of "hot money" had left the country.
According to the analysts, expectations of more depreciation would present the central bank a dilemma on whether to let the currency stay weak or support it to ensure the flow of money going offshore will not worsen.
"We believe a key concern for the PBOC is that an outsized exchange rate devaluation could trigger capital flight," economists at Credit Suisse said.
Although the central bank tried to pacify market concerns by stressing that the depreciation was a one-off adjustment, financial managers of China's wealthy are unlikely to rely on the government's ability to stabilize the yuan.
While capital controls restrict Chinese residents from taking more than $50,000 out of the country each year, some people have found ways to circumvent this by investing overseas, such as buying property in markets like Australia, the United States and Canada.
