China: The Fear Returns

From Business Insider:

It’s happening again.

Chinese stocks sold off overnight on concerns policymakers are struggling to stop the tide of capital outflows.

The benchmark Shanghai composite index dropped 6.42% to hit 13-month lows, dragging other Asian markets down with it. Japan’s Nikkei fell 2.35%.

Here’s Bloomberg (emphasis ours):

Outflows jumped in December, with the estimated 2015 total reaching a record $1 trillion,more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006.

And here’s the

As outflows accelerate, pressure is put on China’s currency to devalue. To support the currency, policymakers have been burning through the country’s foreign reserves at a rate of about $100 billion per month.

When China devalued its currency by just a few percent in the summer, it led to a market rout in August known as Black Monday. The Shanghai index collapsed more than 8% and kicked off a month of market turmoil in global share markets.

Meanwhile, oil also fell back below $30 a barrel after a brief but strong bull run to $32, pushed lower by falling Chinese demand and a supply glut.


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