Global investors are expected to pull USD538 billion out of China’s slowing economy in 2016, the Institute of International Finance (IIF) estimated, although the pace of outflows has dropped. That number would be down a fifth from the USD674 billion pulled out last year, but could accelerate again if fears re-emerge of a “disorderly” drop in the yuan. Sustained outflows can trigger more exchange rate volatility, which could then feed a fresh wave of outflows. “A sharp drop in the renminbi would likely spark a renewed sell-off of global risk assets and trigger a flight of portfolio capital from emerging markets,” the IIF said in a report. For now outflows are slowing. Roughly USD35 billion was pulled out in March, bringing the total since the start of the year to around USD175 billion, well below the pace seen in the second half of 2015. The IIF cited progress Chinese authorities had made in easing worries about the yuan’s direction. They have emphasized there is more focus on its value against a basket of currencies, rather than just the U.S. dollar. One “important unknown”, however, is the threshold of currency reserves below which Chinese authorities would start to worry. They might then either allow the yuan to fall again or markedly tighten capital controls. Reserves have already fallen from USD4 trillion in June 2014 to around USD3.2 trillion in February 2016. However, the difference between actual reserves and what could be required has dropped to 15% from 50% just under two years ago. “From this perspective, continued large capital outflows could lower the country’s official reserves to a level that is regarded as inadequate without a serious tightening of capital controls,” the IIF said, as reported by the South China Morning Post.