It may sound counterintuitive but it actually makes perfect sense. China’s tight currency controls make it so the only way to gain access to its economy (which

It may sound counterintuitive but it actually makes perfect sense. China’s tight currency controls make it so the only way to gain access to its economy (which has obviously been growing phenomenally over the last 40 years) is to do direct investment, not portfolio investment like you would with a liberal currency. Further, fdi is a small part of the economy. Something like 400 billion dollars a year if you believe the Chinese figures that are most optimistic. So there can exist at the same time, foreign capital that wants to invest in the country and domestic capital that wants out. Even if it’s just the same proportion as the economy you’d see large capital flight. The real question is what would happen if China liberalized its currency? Would that power investment more than it caused rapid flight? Who knows but every time the yuan opens a little trillions flows out of the country and the currency regime gets more conservative again. https://rhg.com/research/cutting-through-the-fog/ https://rhg.com/research/cutting-through-the-fog/