Recent data indicates China experienced massive foreign exchange outflows of $82 billion in January 2025, marking the second-largest capital exodus since the 2015 currency devaluation. This significant movement of funds combines approximately $42 billion in outflows through onshore spot transactions and $40 billion via cross-border RMB flows.
While official Chinese foreign exchange reserves appear stable at $3.2 trillion – near nine-year highs – alternative measurements paint a drastically different picture. Analysis of onshore transactions, forward trades, and SAFE cross-border flow data reveals the true scale of capital leaving China’s shores.
The current account channel displayed notable outflows of $21 billion in January, compared to December’s $2 billion inflow. Though goods trade generated a $14 billion inflow, this marked a significant decrease from December’s $35 billion. Service trade deficit-related outflows reached $33 billion, while income and transfers accounted for $2 billion in outflows.
These developments mirror patterns observed in late 2023, when similar large-scale outflows preceded substantial increases in Bitcoin’s value. The cryptocurrency doubled in value over the following four months after October 2023’s $75 billion outflow spike. A similar pattern emerged in mid-2024, with another Bitcoin price surge following renewed Chinese capital flight.
The yuan’s recent performance provides additional evidence of mounting pressure. After strengthening in fall 2023, the USDCNH has shown consistent upward movement since October, suggesting increasing capital outflow pressures. This trend coincides with growing concerns about potential U.S. tariffs under a possible Trump administration and their impact on Chinese currency values.
Treasury International Capital data reveals that Chinese investors sold $14 billion in U.S. securities during December, continuing a pattern of divestment that began with record sales in May. This sustained selling of U.S. assets occurs as Chinese authorities increase gold purchases and wealthy Chinese citizens reportedly utilize cryptocurrency channels through locations like Macau to move capital offshore.
Despite Beijing’s efforts to maintain currency stability through negative countercyclical factors in daily CNY fixing and tighter CNH liquidity, recent reports suggest Chinese officials are already considering yuan devaluation strategies in response to potential U.S. tariffs. This echoes the 2015 scenario when China’s currency devaluation triggered significant capital flight and contributed to Bitcoin’s dramatic price appreciation from $250 to several thousand dollars.
The situation intensifies as Chinese policymakers balance competing pressures. With Japan’s yen at three-decade lows, China faces increased competition in export markets. The combination of these factors – massive capital outflows, strategic currency management, and external trade pressures – creates conditions reminiscent of the 2015 devaluation period.
The scale of potential capital movement remains significant, given that China’s investable capital pool is approximately three times larger than that of the United States. This suggests that current outflows could be merely preliminary, with the possibility of much larger capital movements if China proceeds with currency devaluation or faces increased trade pressures.
The parallels to 2015’s events, particularly regarding cryptocurrency markets, suggest similar outcomes could unfold. As China navigates these complex monetary and trade dynamics, the global financial community watches closely for signs of policy shifts that could trigger another wave of capital flight and corresponding asset price movements across various markets.