2016 started with sharp declines in the Chinese stock market that spooked investors around the world. But in recent weeks, conditions appear to have stabilized. Lending in China rose in January by 67%, iron ore prices rallied by 64% and housing sales in China’s top four markets also surged. The yuan also regained about half of the 7% it had lost against the US dollar since November.

But the news is not all good.

$800 billion of debt was added to the economy in January but it failed to boost production or increase sales. Producer prices dropped by 5.1% in January-February while the manufacturing PMI fell to 48 in February from 48.4 in January, signaling further economic slowing. The market is apparently not convinced that the government can keep inflating an already overleveraged economy.

And one very telltale instance of the “rats leaving the sinking ship” shows you the true story….

Chinese Money Is Leaving the Country at a Record Pace

The recent pause in the Chinese markets were engineered by a new round of manipulation by the Chinese authorities that will not be able to hold back the adjustments that need to occur for long. As Anne Stevenson-Young and Kevin Dougherty recently warned in The Wall Street Journal, “[f]rom hiding capital outflows to propping up real estate values, manipulating futures markets and squeezing short sellers of the yuan, Chinese authorities have been trying to bring back the old, quasi-superstitious belief in Beijing’s omnipotence.” They go on to warn that “[c]ommodities, emerging market equities and multinationals with exposure to China have already started to realize significant losses. Soon major corrections will reach other assets boosted by the Chinese economy, such as property values in Hong Kong and Singapore. When this unfolds, U.S. government bonds may be the world’s only safe haven. The end of the China story is at hand.”

Many native Chinese appear to believe that is the case. Money continues to try to leave the country in droves.