China Capital Flow Tracker 2026 Q3 Net FX receipts rebound with trade surplus and contained outbound investment

CHINA CAPITAL FLOWS TRACKER 2026 Q3 WRITTEN BY Net FX receipts rebound with trade surplus Alicia GARCIA HERRERO and contained outbound investment Tel. After a small bump earlier this year, China's net FX receipts (three- Gary NG month average) have increased from RMB 29 billion in March 2026 Tel. to RMB 54 billion in June 2026, bolstered by the resilient trade surplus and narrowed outflows in securities investment.

Despite geopolitical tensions trade barriers, and after a small bump in Q1, China's exports of goods have stayed competitive with China: Bank Clients' Net FX lower prices, abundant industrial capacity, and greater innovation. Receipts by Type (USD bn) At the same time, the recently introduced additional limits on Net FX Receipts Current Account outbound investment in securities has kept more money onshore. Capital & Financial Account Capital flows into Hong Kong through the Southbound Stock 80 80 60 60 Connect have normalized after a very strong Q1 2026, and the 40 40 exhaustion of QDII quota has fueled subscription restrictions. This 20 20 trend of reduced net portfolio outflows is expected to continue in 0 0 -20 -20 Q3 as the crackdown on some offshore-investment channels only -40 -40 began on May 22, and there are still policies coming, such as the -60 -60 new tax rules on offshore trust announced on July

N.B. Data as of June 2026. Three-month average. Source: While the trade surplus remains strong, China’s FX settlement Natixis, China State Administration of Foreign Exchange, CEIC ratio (excluding forward purchases) fell in Q2, suggesting it is less urgent for exporters to convert their FX receipts in the yuan as the China: Bank Clients' FX Settlement RMB cyclically. Lower FX sales ratio (excluding forward purchases) and Sales Ratio (%) and higher hedging ratio also show importers making more payments in foreign currencies and taking advantage of cheaper FX Settlement Ratio FX Sales Ratio forward hedging. Regulatory changes to cut the FX risk-reserve 70 70 ratio from 20% to zero in March 2026 have reduced the cost to 65 65 banks of selling FX forward to customers, giving importers more 60 60 flexibility in securing forward rates and smoothed RMB 55 55 appreciation pressure in the spot market. 50 50 Going forward, the global concern over the China Shock 2.0 will 45 45 likely bring more trade barriers, but it may not change the N.B. Data as of June 2026. Three-month average. Excluded structural manufacturing advantages and the weaker import forward purchases. Source: Natixis, China State Administration growth driven by self-sufficiency anytime soon. It is possible that of Foreign Exchange, CEIC net outflows will remain in capital and financial accounts, but the scale is not comparable to the trade surplus, and the flows are now tightly controlled by cross-border capital scrutiny. As a result, China’s capital flows should remain positive driven by the trade Discover more of our research… surplus, which should continue to support the yuan at a pace comfortable for policymakers. … on research.natixis.com ***Usual chartbook is at the appendix.

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Rebound in net capital inflows After a small bump earlier this year, China's net FX receipts (three-month average) have increased from RMB 29 billion in March 2026 to RMB 54 billion in June 2026, bolstered by the resilient trade surplus and narrowed outflows in securities investment (Chart 1).

Chart 1 China: Bank Clients' Net FX Receipts by Type (USD bn)

120 120 Trade in Goods Trade in Services 60 60 40 40 Primary & Secondary Income 20 20 0 0 Direct Investment -20 -20 -40 -40 Securities Investment -60 -60 Other Investment

N.B. Data as of June 2026. Three-month average. Source: Natixis, China State Administration of Foreign Exchange, CEIC

Trade surplus and contained outbound investment as drivers Elevated trade surplus

Despite geopolitical tensions and trade barriers…