China says increasing outflow of money is normal, no sign of panic capital flight

Money has been leaving China rapidly, increasing the fear of capital outflow in the world's second largest economy, but a senior official at the foreign exchange said Thursday that this issue is "normal," and is not leading to panic capital flight.

Reuters reported that State Administration of Foreign Exchange (SAFE) Deputy Head Wang Xiaoyi said that China can keep international payments and receipts balanced due to a positive economic outlook.

He said, "Current changes (in capital flows) are normal, which should not be regarded as capital flight." According to Wang, the major reasons for the recent outflow of money from the country were the willingness of companies and individuals to hold foreign exchange, as well as strategic moves from big firms that seeks to adjust foreign debt structures and increase overseas investments.

Bloomberg Business reported that $141.66 billion went out of China in August. This is higher than the recorded $124.26 billion that left the country in July.

Even the major provider of bank card in the country, China UnionPay, according to Channel News Asia, planned to limit the annual withdrawals to only 100,000 Yuan, or USD 16,000, every year starting 2016. This cap comes amid news that more investors are moving capital abroad for higher returns as the economy slows down.

China's foreign exchange reserve had its biggest quarterly drop in July to September. This happened right after the central bank tried to calm the global market after China devalued its currency in August.

Data released by SAFE on Thursday showed that commercial banks from China sold a total net of 729.6 billion Yuan of foreign exchange for their clients in September. This is a drop from the 807 billion Yuan that was sold in August.

Even before the devaluation of the Yuan and the impending interest rate hike by the US Federal Reserve, there are some investors who had already been withdrawing their money from China.