China’s Trillion-Dollar Hot Money Outflow in 2025

China’s Trillion-Dollar Hot Money Outflow in 2025

[Peopel News] Bloomberg published an article on January 12, 2026, titled “China Turns to Big Data and Public Shaming in Hunt for Tax Evaders”, revealing that according to an index compiled by Bloomberg Intelligence, about US$940 billion in so-called “hot money” flowed out of China between January and November 2025 alone. This scale is expected to make 2025 the second-largest year of capital outflows since records began in 2006.

Based on Bloomberg’s reported data, it can be inferred that China’s total capital outflow for 2025 exceeded US$1 trillion, a figure roughly comparable to China’s foreign-exchange trade surplus for the year. On January 14, China’s General Administration of Customs announced that China’s 2025 trade surplus was approximately US$1.189 trillion.

In other words, the foreign exchange that the CCP earned through an entire year of strenuous effort vanished abroad right before its eyes.

Data released by the State Administration of Foreign Exchange on January 7 showed that as of the end of December 2025, China’s foreign-exchange reserves stood at US$3.3579 trillion, an increase of only US$155.5 billion from last year’s US$3.2024 trillion. Why, then, if the trade surplus was US$1.189 trillion, did foreign-exchange reserves increase by only a small fraction of that amount? Where did the remaining trillion-dollar surplus go?

The main factors affecting annual changes in China’s foreign-exchange reserves include: the annual trade surplus; net hot-money outflows; central-bank intervention in foreign-exchange reserves (i.e., the central bank buying and selling foreign exchange to manage the RMB exchange rate); and valuation effects, meaning positive or negative valuation changes in foreign-exchange assets caused by fluctuations in the U.S. dollar index and Federal Reserve interest-rate adjustments.

In 2025, foreign-exchange inflows from the trade surplus should have been enormous, but they were heavily offset by multiple factors such as net capital-account outflows (including hot-money outflows), central-bank intervention, and valuation changes, resulting in only limited net growth in foreign-exchange reserves.

Changes in China’s foreign-exchange reserves are highly correlated with the trade surplus and hot-money outflows. Without hot-money outflows, China’s foreign-exchange reserves should have surged. From another perspective, the reason China’s foreign-exchange reserves did not experience a large decline is mainly due to massive surplus inflows and central-bank foreign-exchange intervention. If hot-money outflows continue, the trade surplus shrinks, and central-bank intervention weakens, then foreign-exchange reserves will decline significantly.

Bloomberg’s article noted that the largest component of hot-money outflows from mainland China consists of large numbers of residents legally transferring funds to Hong Kong via southbound channels such as the Shanghai–Hong Kong Stock Connect, Shenzhen–Hong Kong Stock Connect, and Bond Connect, and then investing globally from Hong Kong. This portion represents the most “respectable” and legal segment of hot-money outflows, accounting for about half of the total. There are also legal transfers related to emigration. In addition, many funds flow out through gray channels and money-laundering methods, in diverse forms such as cross-border gambling, underground banks, cryptocurrencies, foreign-exchange purchases for overseas study, fictitious trade services, entrepôt trade arbitrage, misreporting customs trade data, and large numbers of relatives and friends each using their annual US$50,000 foreign-exchange quota.

This hot-money outflow may appear to be investment diversification, but in reality it reflects a collective collapse of confidence among China’s wealthy and middle class in the economic prospects of the CCP regime. The outflow of US$940 billion in 11 months is equivalent to about 5–6% of China’s 2025 GDP, a staggering scale. More importantly, this is not foreign capital withdrawing, but rather domestic residents proactively transferring assets abroad.

According to data from Henley & Partners, the net outflow of Chinese millionaires reached 15,200 people in 2024, setting a new record, and is expected to remain high in 2025. These high-net-worth individuals often relocate with large amounts of assets to places such as Singapore, the United States, and Canada. For example, in 2024, Chinese wealthy individuals purchased US$13.7 billion worth of real estate in the United States, up 83% year-on-year, with an average transaction value of US$1.2 million, and 71% paid in cash. This includes both personal wealth transfers and hidden outflows of corporate funds, such as through listings in Hong Kong or overseas mergers and acquisitions.

From a macro-data perspective, according to State Administration of Foreign Exchange data, China’s capital and financial account recorded a deficit of approximately US$518.1 billion in the first three quarters of 2025. In other words, outflows of Chinese financial assets exceeded inbound investment by more than US$500 billion. This figure was US$204 billion in 2020—more than doubling over five years.

Data from China’s Ministry of Commerce show that in 2024, China’s actual utilization of foreign investment was 826.25 billion yuan, down 27.1% year-on-year. On a balance-of-payments basis, foreign direct investment inflows hit their lowest level since 1993. Net FDI outflows reached US$168 billion (or US$168.4 billion), the highest on record, indicating that outbound investment far exceeded inbound investment. As of October 2025, China’s FDI had declined 10.3% year-on-year to 621.93 billion yuan.

Hot-money outflows are not an isolated incident, but rather the result of multiple structural contradictions in the CCP economy having accumulated to an extreme degree. Ordinary people, the middle class, and the wealthy have fundamentally lost confidence in China’s economic prospects. In 2025, China’s GDP growth was reported at 5%, but independent institutions such as the Rhodium Group estimate actual growth at below 3%, or even lower.

A January 14 Wall Street Journal article titled “Giant or Paper Dragon? Measuring China’s Economic Power Through Profits” cited the Oxford University Press book “Trading Blows: How America Can Use Economic Warfare to Retain Global Primacy”, in which authors Brooks and Wohlforth note that measuring economic activity using satellite imagery of nighttime light intensity provides an objective reflection of on-the-ground reality, since “no one manipulates nighttime lights to alter economic data.” Based on this analysis, they conclude that China’s GDP may be about half of that of the United States, rather than the two-thirds suggested by official statistics.

The book also points out that if strength is measured by corporate profits—which the authors view as a proxy for “chokepoints” in global supply chains—the gap between China and the United States is enormous. According to Brooks and Wohlforth, U.S. companies generate 55% of global high-tech profits, while Chinese companies generate only 6%.

The two authors also conducted a study on the “pain ratio.” Their analysis shows that if the United States unilaterally cuts off trade with China, the cost to itself would be about 70% of the pain inflicted on China. However, if the United States acts together with its allies, the ratio changes dramatically, with the damage to China becoming five to seven times that suffered by the United States. They further state that under a U.S.-led naval blockade cutting off all maritime trade, the damage to China could be as much as 11 times that suffered by the United States.

This “pain ratio” is already being rapidly transmitted to the CCP economy, and China’s trillion-dollar trade surplus is triggering a global wave of collective tariff countermeasures against the CCP.

In order to cover up economic wounds and divert public pain, CCP media have been vigorously hyping the notion of an American “kill line” domestically. On January 12, The Economist published an article titled “China Is Obsessed With America’s ‘Kill Switch’”, refuting the CCP party-media narrative.

The article bluntly points out that Chinese netizens’ and official propaganda’s enthusiasm for discussing America’s “kill line” actually reflects anxiety over China’s own economic slowdown and stagnation. Talking about America’s cruelty is far easier than directly confronting China’s malaise.

The article lists China’s economic problems: housing prices have fallen about 20% from their peak five years ago; college graduates are entering an extremely harsh job market, with youth unemployment at 17%; wage growth for blue-collar workers is minimal; overall economic growth is slowing, with once-abundant opportunities disappearing; and since 2018, growth in China’s middle-income population has slowed dramatically.

The article states that various surveys show a marked rise in pessimism over the past decade. This gloom is less about fear of a sudden collapse and more about a widespread sense of “gradual stagnation.” For China, the danger is not suddenly hitting a “kill line,” but rather resembles a “soft lock” in a video game: the character is still alive, but no matter how hard one tries, progress is impossible. It is a feeling of being “stuck”—despite effort, one gradually sinks into stagnation and cannot move forward.

As described by The Wall Street Journal and The Economist, the myth of China as the world’s factory with limitless growth has already collapsed. The trillion-dollar hot-money outflow is a thermometer of economic “confidence bankruptcy.” Intertwined with a real-estate collapse, fiscal distress, weak consumption, an export crisis, and political regression, it weaves an irreversible picture of economic decline under the CCP.

The sinking of this broken CCP ship is only a matter of time.

(First published by People News) △