It is the first quarterly shortfall since China's foreign exchange regulator began compiling the data in 1998, which could be linked to the impact of "de-risking" by Western countries from China, as well as China's interest rate disadvantage. "With interest rates in China 'lower for longer' while interest rates outside of China 'higher for longer', capital outflow pressures are likely to persist," analysts say.
Julian Evans-Pritchard, head of China economics at Capital Economics, said the unusually-large interest rate gap "has led firms to remit their retained earnings out of the country".
He also thinks that in the mid-term the "increasing geopolitical tensions will hamper China's ability to attract Foreign Direct Investments" as global companies will "favour emerging markets that are more friendly to the West."