BEIJING • Persistent capital outflows from China since mid-2014 were probably driven more by local companies paying down their dollar-denominated debt - in anticipation of a stronger US currency - than investors ditching assets, according to the Bank for International Settlements (BIS).

The outpouring of China's currency "led to two different narratives", researchers for the Switzerland-based institution said in a report on Sunday.

"One tells a story of investors selling mainland assets en masse; the other of Chinese firms paying down their dollar debt. Our analysis favours the second view, but also points to what both narratives miss - the shrinkage of offshore yuan deposits."

The BIS warned in December that emerging-market nations may be borrowing too much too quickly.

It examined a record US$175 billion (S$242 billion) net decline in cross-border capital to China in the July-September period of last year.

Of that, the study showed just US$12 billion of this was official reserves outflows, and the remainder was private outflows.

Almost three quarters of the US$163 billion of non-reserve outflows comprised of factors including a reduction in yuan deposits, which was counted as US$80 billion in capital leaving the country.

Local Chinese companies directly repaying US$34 billion in foreign-currency debt to offshore banks and US$7 billion to local banks were also included in the outflows.

Meanwhile, People's Bank of China said in a statement yesterday that the foreign-exchange reserves fell at a slower pace last month as the nation's financial markets stabilised and policymakers took steps to shore up growth.

The world's largest currency hoard dropped by US$28.6 billion to US$3.2 trillion.

BLOOMBERG