And the hits just keep on coming for China.

With its economy on the verge of a Japanification vicious loop, where record debts, lead to distressed selling, repayment of debt, contraction in the money supply, falling asset prices, a wave of bankruptcies, surging unemployment, a slowing economy and a crisis of confidence, which then leads to money hoarding and deflation…

 

… not to mention a growing property crisis, shadow banking crisis, a youth unemployment crisis, a record collapse in foreign direct investment…

… China is now also facing a sudden surge in FX outflows: according to Goldman’s preferred gauge of FX flows, China’s net outflows were $42bn in August, the fastest pace of outflows since December 2016 when China was reeling from the 2015 shock yuan devaluation, vs the already concerning $26bn outflows in July (which we discussed last month). Foreign investors’ net selling of equities through the stock connect channel rose materially in August, contributing to the acceleration of outflows. Goods trade related inflows remained robust on the other hand.