China has suffered large and “unprecedented” outflows of capital since Russia invaded Ukraine, according to the Institute of International Finance (IIF).

“Something very unusual is happening in global capital flows to EM (emerging markets),” said the IIF in a report.

“China is seeing large outflows in our high-frequency tracking of daily flows, with these outflows starting after Russia invaded Ukraine towards late February …

“Outflows from China on the scale and intensity we are seeing are unprecedented, especially since we are not seeing similar outflows from the rest of emerging markets …

“At this stage, it is too early to say if outflows from China represent a structural change, but the timing of outflows suggests Russia’s invasion of Ukraine may be playing a role, giving foreign investors pause and making them look at China in a new light.”

The IIF report reads: “We periodically use our Global Macro Views to provide updates on our high-frequency tracking of global capital flows to EM.

“We do this whenever something notable is happening, as when COVID first hit in 2020 and many EMs saw unprecedented outflows or when contagion risk is elevated, as in mid-2018 when sell-offs in Argentina and Turkey spilled over to the rest of EM.

“One constant through all the ups and downs of recent years is China, which saw steady inflows as foreign investors built their exposure, even through China-specific shocks like US tariffs and the early stages of COVID.

“So it is all the more notable that we are now seeing unprecedented capital outflows from China, which began after Russia’s invasion of Ukraine in late February.

“Of course, at this stage it is too early to say if the war is driving outflows or if other factors are to blame.

“But we think these outflows are notable enough to at least raise the possibility that Russia’s invasion of Ukraine may be pushing global markets to look at China in a new light.

“We track daily flows to the world’s biggest EMs.

“Our flows correspond to non-resident portfolio flows into stocks and bonds in the balance of payments, where official data are usually published in aggregated form with a lag of several quarters.

“We have back-tested our flows to ensure that they provide an accurate real-time depiction of what will subsequently be published in official balance of payments data …

“The charts show that flows to China have gone negative recently, while flows to non-China EM are flat in the most recent datapoint.

“This kind of composition of flows – China going negative, while the rest of EM holds up – is unprecedented …”