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By: Kendrick Low



Russia currently faces ‘accelerating’ prices in its latest bout of inflation, which is ‘eas[ing] elsewhere’. Inflation in November was 7.5% year on year, up from 6.7% in the previous month. Worryingly, inflation is expected to see continued rises, with Russia’s central bank increasing interest rates by ‘twice what had been expected’, a whole two percentage points.

While the first inflation spike in 2022 was due to a weaker rouble, the impact of currency valuations are not as pronounced, with the rouble actually appreciating, says the Economist. However, his wartime economy is ‘dangerously overheating’, with inflation in the services sector said to be ‘exceptionally high’. Most economists believe this is due to ‘soaring’ government outlays as Putin strains to defeat Ukraine on the battlefield. With an impending election, his government is rolling out mass-scale welfare payments, especially for the families of soldiers killed in action, ‘equivalent to three decades of average pay’. This fiscal stimulus already comprises around 5% of GDP, further increasing the national growth rate. Goldman Sachs and JPMorgan Chase have both pointed to substantial with estimates, with the latter recently lifting its GDP forecast to 3.3%. Western beliefs of Russian economic collapse have ‘proven thumpingly wrong’, with Putin ‘confidently’ ‘boast[ing]’ that growth would be strong. However, Putin fails to address a critical problem impacting the economic growth Russia expects- that its own economy ‘cannot take such rapid growth’, with its supply of labour and investment having ‘drastically shrunk’. With thousands of highly educated workers fleeing the country and foreign investors withdrawing around $250bn of direct investment, ‘almost half the pre-war stock’. Alongside this, with demand soaring to newfound highs, there are higher prices for raw materials, capital and labour. While higher interest rates may eventually stifle this demand, Putin has ‘plenty of financial firepower’ that he can utilise in order to win the war raging in Ukraine, likely his top priority, even over economic stability. 



After the once enthusiastic outlook on China that many investors adopted, the severe pandemic lockdowns the country has imposed and deep cracks in its property market, coupled with ‘lacklustre’ growth forecasts, ‘capricious autocratic relationship’ and tenuous relations with its large trading partner, have prompted a mass exodus of capital and investors from China, as are many of China’s elite. The Institute of International Finance states there have been cross-border outflows for a whole five consecutive quarters for Chinese stocks and bonds, ‘the longest streak on record.’ Firms, too, are starting to exit, with the net flow of foreign direct investment in the country turning negative, ‘for the first time since the data began to be collected a quarter of a century ago’. In the ‘murky’ data of China’s balance of payments, some estimate up to $500bn has flowed out of the country. The last exodus before the current surge occurred in 2015-17, due to a stock market crash and a subsequent currency devaluation. In 2015 alone, estimates for the size of the outflows were ‘as much as $1trn’. At the time, the Economist reports, many countries ‘welcomed Chinese capital with open arms’. 


Currently, due to huge suspicion, Chinese funds are making their way to other destinations worldwide. The first hurdle these fleeing investors must overcome are Chinese capital controls- mainland residents can buy tradable insurance policies in Hong Kong, with the first nine months of 2023 seeing sales of insurance to mainland visitors skyrocketing to HK$47bn, 30% more than the same period in 2019. Firms are misinvoicing trade shipments and overstating the value of goods being traded, in order to allow money to escape the country. 


However, many areas are ‘less inviting’ to such investors than during the last period of capital flight, especially in the US, with state legislation preventing foreign citizens residing overseas from buying land and property, Canada disallowing non-residents to buy real estate, and European Golden visas, offering residency rights for investment, falling out of favour. Hong Kong, states the Economist, has seen ‘dimmed’ appeal as a ‘bolt hole for rich families after the extradition bill protests and ensuing ‘political crackdown’. And its replacement? Singapore. Its appeal derived from its relative proximity, reduced taxes and prevalence of Mandarin, with its direct investment with the Chinese mainland rising by 59% since 2021, rising to S$19.3bn last year. ‘Suspicious gaps’ in the trade data, according to Goldman Sachs, suggests greater unrecorded capital flight. Due to roaring Chinese demand, family offices in Singapore shot up from 400 in 2020 to 1,100 by the end of 2022. While there is ‘little transparency’ about the assets held by the rich investors, it seems that most of the cash will gradually be invested abroad. However, these inflows have supported local banks, with golden visas’ issuance in Dubai rising 52% in the first 6 months of 2023 year on-year, with many visa holders thought to be Chinese. 


Japan is soon becoming a hotspot due to the weak yen, which has weakened 20% against the Chinese yuan. 70% of buyers view the property via video call and buy without first visiting it, and Australia is seeing similar rises from potential owner-occupiers, not investors hoping to make money from rent. Since 2020, states property firm Juwai IQI, the median price of homes worldwide receiving inquiries from Chinese buyers has increased from $296 -728,000 USD. Rather than purchasing smaller properties to rent out, buyers instead are shopping for spacious ones to live in. 


However, the influx of capital has also put pressure on Singapore’s housing markets, largely dominated by HDBs with under half a million private units, forcing the government to implement an ‘eye-watering’ 60% tax on all property purchases by foreigners to cool the market. Furthermore, illicit activity has been recorded entering Singapore, with 10 foreigners of Chinese descent arrested in a S$2bn scandal, seizing assets such as cars, luxury property and jewellery. Outflows, this time, though, will stay for longer as the Chinese government allows the situation to cool. Investors will continue their flight, leading to a multitude of outcomes.

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