The 2008 China Financial Market Development Report, issued by the People's Bank of China on May 4, pointed out that various stimulus packages launched by respective countries would influence supply and demand relation in international financial market. This may probably lead to a large scale withdrawal of capital from emerging markets. "If the inflowing offshore funds in China begin to outflow, it may probably result in a drastic adjustment in the stock market and bond market of China," said the report.

The warning of the Chinese central bank is based on the financial crises as it occurred in different countries as well as the appreciation of the US dollar since the later half of 2008. The dollar value moving up resulted from the flowback of large sums of money from international markets to the US after subprime mortgage crisis.

After the financial tsunami broke out in the US in 2008, it is not only the US financial institutions that brought back the capital invested overseas to make up the shortage of liquidity but capital in the global market also sought a safer place--the US market. Therefore, it is no surprise that foreign capital withdrew from emerging markets considering that capital from other parts of the world also flowed to the US.