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Photographer: Tomohiro Ohsumi/Bloomberg Photographer: Tomohiro Ohsumi/Bloomberg

While the world marvels at the rise of Chinese stock prices, money is quietly leaving the country at the fastest pace in at least a decade. Louis Kuijs, Royal Bank of Scotland’s chief China economist, estimates that China lost $300 billion in financial outflows in the six months through March. Deltec International, a Bahamas investment firm, puts the number even higher.

This is an historic reversal. From 2006 until last year, China’s reserves of foreign currency quadrupled to $4 trillion. Some of the money came from trade surpluses and some from foreign investors’ spending their dollars, yen, and euros on long-term investments in China such as factories, hotels, and companies. Another chunk of the $4 trillion, though, was hot money—from investors who look around the world for the bond at the right rate or the stock that promises the quickest return. Hot money investors also borrow cheaply in one country to purchase bonds at higher rates in another. It’s legal, but they change their investments so swiftly that they can rattle bond and stock markets.

China looked like a great deal for hot money—both Chinese and foreign—because it had a strengthening currency and a rising stock market. It doesn’t look so tempting anymore. Stocks have gotten so high that investors worry there’s no upside left—witness the recent tumble in the Shanghai composite index—and the yuan has yo-yoed since the end of 2013. Slowing growth and a real estate slump are leading to bad loans and even some bond defaults. An anticorruption crackdown led by President Xi Jinping is sending a chill through parts of the economy.

China’s official foreign exchange reserves fell $260 billion between June and March. The investors moving money out include foreign hedge funds and Chinese individuals and companies, and the money leaves China in a variety of ways. Some escapes illegitimately, by skirting strict currency rules, and some of the transfers are approved by authorities—such as increased overseas lending by Chinese banks.

If it continues, the exodus of funds will put the People’s Bank of China, the central bank, in a bind. China could retain some of this money by raising rates, but it’s leaning toward cutting them to stimulate growth. “Expectations that there will be an interest rate cut in the near term are fermenting,” says Yu Pingkang, an economist at Huatai Securities in Shenzhen. Lowering the central bank’s benchmark lending rate would weaken the attractiveness of Chinese investments and possibly accelerate the outflow.

China optimists note that some of the decline in official foreign exchange reserves reflects the drop in the euro, one of the currencies China holds. And banks’ foreign exchange reserves have actually been rising. The capital outflow doesn’t approach crisis levels, and strict currency controls remain in place.

Still, some economists see it as a warning. “The fact that we see money flowing out at all is reflective of some doubts creeping in about the stability of the economy,” says Frederic Neumann, co-head of Asian economics research in Hong Kong at HSBC Holdings. “If everything was fine and dandy in China you would buy property, buy equities, or leave your money in a bank account, because the returns in China are still higher than overseas.”

Easing the reserve rules on banks is one way China can stimulate the economy without scaring off foreign investors by reducing rates. In April, the People’s Bank of China cut the level of deposits most banks need to hold in reserve with the central bank. That money can now be circulated in the economy in the form of new loans. For the biggest state banks, the reserve requirement was lowered a full percentage point, to 18.5 percent.

Analysts differ on how much of the money leaving China is hot. Much of it reflects China’s growing economic muscle, with its big companies buying assets all over the world. Chinese companies bought foreign companies at a record pace in 2014. Outbound mergers and acquisitions increased to $76.5 billion in 2014, up 28.5 percent from a year earlier, data compiled by Bloomberg show.

While Chinese officials say they’re not concerned about the outflows, they’re taking steps to counter them. Since April authorities have stepped up the hunt for corrupt officials who fled overseas, taking government funds. The central bank is working with the public security ministry investigating crimes that involve overseas money transfers, the Communist Party’s antigraft agency said in March. Some investigations have already resulted in the seizure of illegally gotten assets.

To escape possible state seizure of a rich Chinese family’s capital, “The easiest solution is to move the money offshore,” says Andrew Collier, managing director of Orient Capital Research. If the wealthy elites who control 50 percent of the nation’s savings suddenly conclude their money is at risk of confiscation, the outflow “could become a flood very quickly,” he says.

With $3.73 trillion in reserves, China is in no danger of running out of money. “There is not a lot of reason to be in a panic now,” says Kuijs. “But policymakers will want to be very careful.”

The bottom line: Money is leaving China at a record rate, creating headaches for government officials as the economy slows.