Chinese officials insist solemnly that the new basket rate is the “decided policy of China” and will be upheld come what may, but concerns are mounting that they may be overwhelmed by market forces.The Telegraph
The crucial question is whether the exodus of money is chiefly a one-off move by Chinese companies and investors to pay off dollar debt - and to unwind "carry trade" positions in dollars – as the US Federal Reserve raises interest rates and drains liquidity. If so, the outflows are largely benign and should make the world’s financial system safer.
Mark Tinker, head of equities for AXA Framlington in Asia, said the bulk of the outflows are to pay off liabilities. “Chinese corporates are issuing corporate bonds in record quantities and using the capital to restructure their balance sheets, both onshore and offshore. This is not capital flight, it is asset liability matching, both duration and currency. It is a good thing being presented as a bad thing,” he said.…
Time running out for China on capital flight, warns bank chief
Ambrose Evans-Pritchard
1 comment:
It's a perfect storm. They've violated the trinity when they opened capital markets at the same time they clamped down on corruption and sent millions of Chinese to stash money abroad. And at the exact same moment, their one-child policy began to bite and their growth dried up leading to a credit contraction in an economy that is dependent on investment with the implicit guarantee of dollar-yuan convertibility within a tight range and cheaper dollar funding. The problem is that the Chinese refuse to admit that they don't have control anymore. Men pretending they can leave the house not using the door.
Post a Comment