A man checks Chinese yuan bills in Beijing on July 28, 2015. The yuan is declining against the dollar and bitcoin as Chinese move money out of the country. (FRED DUFOUR/AFP/Getty Images)A man checks Chinese yuan bills in Beijing on July 28, 2015. The yuan is declining against the dollar and bitcoin as Chinese move money out of the country. (FRED DUFOUR/AFP/Getty Images)

The Chinese currency, le yuan, is a strange animal. Linked to the dollar, it hardly moves—but when it does, financial markets get jittery, especially when it’s going down.

The yuan lost 1.1 percent against the dollar in October, which doesn’t seem like a lot. It’s what’s behind the one percent move that has markets on edge.

According to investment bank Goldman Sachs, as much as $500 billion in capital has left China this year through September. Chinese companies and citizens, as well as foreigners, convert their yuan holdings into dollars and other foreign currencies, moving the price of the yuan down. Outflows picked up especially in September, reaching $78 milliard.

gsyuanoutflow

If there is no additional demand for the yuan from trade, par exemple, the price of the currency has to move down to adjust for the imbalance in the demand for foreign currency. Fundamentally, this is a vote of no confidence in the Chinese economy. If risks and returns of Chinese assets were favorable—as they were for most of the past decade—capital would be flowing into China and not out.

Regime Meddling

However, the Chinese leadership wants to limit the visibility of this vote of no confidence and give the impression of financial stability, so it is applying two levers to obscure the move.

Premier, it is selling off its once mighty stash of official foreign currency reserves, down from $3.33 trillion in January to $3.17 trillion at the end of September. In August of 2014, it was close to $4 billion.

It is simply a transfer of public Chinese foreign exchange assets to private hands intermediated through global financial markets. If the amount of foreign currency bought by the private sector and sold by the official sector matches, the impact on the price of the currency is limited.

Par exemple, Chinese official holdings of U.S. Treasury bonds are down from $1.25 trillion at the beginning of the year to $1.19 trillion at the end of August. However, Chinese corporates have either completed or announced $218.8 billion in mergers and acquisitions of foreign companies this year, according to Bloomberg data.

(Bloomberg)

(Bloomberg)

The rest of the record corporate buying spree was financed by Chinese state banks and other foreign exchange reserves held at the People’s Bank of China (PBOC).

Chinese companies have previously invested in steel mills and coal mines like there is no tomorrow. However, because mining and manufacturing have massive overcapacity and debt issues, Chinese companies are looking overseas for better investments.

But it’s not only Chinese corporates that are suddenly discovering the value of foreign assets. Chinese citizens have also been active buyers of foreign real estate and stocks. Purchases of equities traded on the Hong Kong stock exchange by mainland citizens, par exemple, hit a record high of $12 billion worth of buy orders en septembre, en haut 64 percent from August.

Capital Controls

So the Chinese regime is pulling the second lever to limit outflows: contrôles de capitaux. Transfers of capital for citizens are already capped at $50,000 par an, so people found nifty ways around this limit. Like buying millions worth of life insurance products, a form of capital investment, in Hong Kong for example with their Union Pay debit card. But not anymore.

As of October 29, they can only use their UnionPay cards to buy insurance related to travel, according to UnionPay Co. Mainland visitors bought $3.9 billion worth of insurance products in Hong Kong in the first half of the year, according to the city’s insurance industry regulator, un increase of 116 percent over the same period of 2015.

The regime also continues to crack down on underground banks which facilitate capital outflows. According to reports by mainland paper Financial News, the State Administration of Foreign Exchange (SÛR) seized $8.4 billion in foreign exchange funds during an investigation in late October.

So unlike the mostly state-owned companies which are snapping up foreign assets with the blessing of the regime, Chinese citizens have to find other ways to reduce their exposure to the Chinese economy. They are fed up with the low-interest rates on bank deposits and are increasingly afraid of the risks of the unregulated wealth management products.

(HSBC)

(HSBC)

One channel that still seems to work is the flow of yuan from the mainland to offshore centers like Hong Kong and Singapore. Goldman estimates $45 billion out of the $78 billion in September outflows was transferred from the mainland banking market to the offshore yuan market, where it was likely converted into foreign currency.

The offshore yuan (CNH) has lost 4.8 percent against the Hong Kong Dollar since May where its domestic counterpart (CNY) only lost 4 pour cent, indicating more selling pressure on the offshore yuan.

Another vehicle, mostly used when all else fails, is the electronic currency Bitcoin. After moving sideways for most of the summer, the price skyrocketed since late September, coinciding with the latest measures to restrict capital outflows and the drop in the yuan. Hélas, it is a bit more volatile than its official counterpart. It’s up 23 pour cent à $705 since Sept. 25, without regime meddling and for everyone to see.

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A sign hangs on One Chase Plaza in lower Manhattan on Oct. 14, 2014 a New York. The iconic building is owned by a Chinese private equity firm as part of its overseas investment strategy.  (Spencer Platt / Getty Images)A sign hangs on One Chase Plaza in lower Manhattan on Oct. 14, 2014 a New York. The iconic building is owned by a Chinese private equity firm as part of its overseas investment strategy.  (Spencer Platt / Getty Images)

Chinese investments in the United States reached a new record level of $18.4 milliards dans la première moitié de 2016, up three times compared to the same period last year, and even higher than all of last year ($15.3 milliard).

Strong mergers and acquisitions activity accounted for the majority of the incoming Chinese capital, said research firm Rhodium Group.

With the stock market crash in China that began in June 2015, the flow of outbound investment from China to the rest of the world soared. Avec growing uncertainty about exchange rates and the economic and political outlook, investors are seeking to stash away capital in safe havens like the United States.

“The rapid growth of Chinese outbound (Foreign Direct Investment) FDI in the first half of 2016 has triggered political reactions both in China and host economies,” Rhodium stated.

Capture d'écran 2016-07-25 à 2.07.01 PM

This capital flight has led to a further deepening of FDI deficit in China’s balance of payments. So Chinese regulators are increasing their scrutiny of outbound investment transactions.

“China’s leadership continues to pledge its commitment to further external liberalization, but concerns about capital outflows have clearly grown and the State Administration of Foreign Exchange (SÛR) and other regulators have taken informal steps in recent months to ‘manage’ the outflow of foreign exchange,” the research firm said.

The appetite of private Chinese companies for U.S. investments remains high.

— Rhodium Group

This has increased concerns about the ability of Chinese companies to close deals, driving up risk premiums and reverse break fees for Chinese buyers.

A sharp uptick in the Chinese deal-making activity in the United States is also keeping U.S. regulators busy.

The Committee on Foreign Investment in the United States (CFIUS), reviews foreign acquisitions for national security threats and China for the last few years has been in the top spot for covered transactions (transactions that result or could result in control of a U.S. business by a foreign person).

A number of transactions have run into delays because of CFIUS and other regulatory reviews including Syngenta, Ironshore, Fidelity & Guaranty Life, according to the Rhodium report.

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Strategic Versus Financial Investments

The Chinese investments in the United States in 2016 were spread across a wide range of sectors including entertainment, consumer products and services, technology, and automotive.

Besides M&A activity, Greenfield projects, where companies start building their operations from scratch, were also strong, driven by capital-intensive projects in real estate and manufacturing.

Plus que 80 percent of all Chinese FDI transactions in the United States in 2016 are considered as strategic investments (firms investing in their core areas of business). The largest strategic investment was Haier’s acquisition of GE’s home appliances business for $5.6 milliard, in consumer products sector. And the second largest was Wanda’s purchase of Legendary Entertainment for $3.5 milliard, in the entertainment sector.

Other sectors attracting large investments include information and communication technologies (acquisition of Omnivision Technologies by a Chinese consortium for $1.9 milliard) and automotive (Ningbo Joyson’s acquisition of Key Safety Systems for $920 million).

Financial investments (investments for financial returns) amounted to $3.5 milliard, ou 20 percent of total investment in 2016, according to Rhodium. Most of them were driven by private investors buying commercial real estate assets in major coastal cities.

Capture d'écran 2016-07-25 à 2.07.35 PM

Perspective

The value of announced but not yet completed Chinese investments was still close to an all-time high of $33 billion at the end of June 2016, selon le rapport. Major M&A transactions include HNA Group’s $6 billion bid for technology distributor Ingram Micro, Anbang de $6.5 billion acquisition of Strategic Hotels & Resorts, and Apex Technology’s acquisition of Lexmark for $3.6 milliard.

There are also pending investment in real estate development projects in New York and California.

“The appetite of private Chinese companies for U.S. investments remains high. … It is reasonable to assume that recent geopolitical shocks (Brexit) and related USD strength will aggravate capital outflows in coming months,” Rhodium said.

“This makes it likely that regulators will continue or even increase scrutiny of outbound FDI transactions, particularly for deals involving large amounts of foreign exchange and those with a financial nature.”

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Un employé de banque compte des billets de 100 yuans dans une banque à Hangzhou, La province du Zhejiang est de la Chine sur Décembre 1, 2015. la reconnaissance de la monnaie de la Chine du Fonds monétaire international est une étape pour encourager son utilisation mondiale, mais les banques restent réticents à détenir yuans à moins Pékin pousse plus profondes réformes financières, Les analystes disent.          (STR / AFP / Getty Images)Un employé de banque compte des billets de 100 yuans dans une banque à Hangzhou, La province du Zhejiang est de la Chine sur Décembre 1, 2015. la reconnaissance de la monnaie de la Chine du Fonds monétaire international est une étape pour encourager son utilisation mondiale, mais les banques restent réticents à détenir yuans à moins Pékin pousse plus profondes réformes financières, Les analystes disent.          (STR / AFP / Getty Images)

Pour la plupart des gens, sons DTS comme une maladie étrange. Et encore, il pourrait être la prochaine monnaie de réserve du mot, au moins si la Chine et le Fonds monétaire international (FMI) obtenir leur chemin.

La dite Droits de tirage spéciaux (SDR) sont une construction du FMI des monnaies réelles, dès maintenant l'euro, yen, dollar, et la livre. Il a fait des nouvelles l'an dernier lorsque le renminbi chinois a également été admis, bien qu'il ne sera pas officiellement partie du panier jusqu'au 1er Octobre de cette année.

les membres du FMI ont et peuvent échanger les uns avec les autres pour les monnaies réelles, qui redevables des pays comme la Grèce et le Soudan font souvent. La moyenne Joe ou l'entreprise moyenne dans la rue ne peut pas tenir l'instrument dès maintenant, encore moins dépenser.

Mais c'est précisément ce que l'élite monétaire mondiale veut à l'avenir pas trop lointain, et il va utiliser la Chine comme un cochon de Guinée. Avant la réunion du G20 les banques centrales et les ministres des Finances à Chengdu, China, à partir de Juillet 22-23 certains universitaires ont commencé à pousser l'idée d'une utilisation prolongée du DTS (actuellement une valeur $1.39)

«L'établissement du DTS en tant que principale monnaie de réserve mondiale aurait des avantages de grande envergure" Jose Antonio Ocampo, professeur à l'Université de Columbia, écrit dans un post sur Project Syndicate en juillet 8.

"Au-delà de la poussée à utiliser DTS plus activement dans les programmes du FMI, les gouvernements pourraient émettre des obligations libellés en DTS. de plus, les banques privées pourraient augmenter leur utilisation de cette unité monétaire, comme certaines banques européennes ont utilisé l'unité dite monétaire européenne, aider à ouvrir la voie à l'euro," il continue.

FMI est à lui aussi bien

Au bon moment, la FMI lui-même a publié un document sur "si un rôle plus large pour le DTS pourrait contribuer à [ce système monétaire international] bon fonctionnement. "

Elle fait écho à l'idée de Ocampo des sociétés privées qui émettent des obligations en DTS et les banques font des prêts en DTS, ou une version spéciale de celui-ci a appelé M-SDR, probablement debout pour «marché» des instruments fondés comme les obligations.

Le FMI expérimenté avec ces M-DTS dans les années 1970 et 1980, lorsque les banques avaient SDR 5-7 milliards en dépôts et sociétés avaient émis SDR 563 millions en obligations. Un montant dérisoire, mais le concept a travaillé dans la pratique.

"M-DTS est apparue dans les années 1970 et au début des années 1980, avant que le marché fané, mais il y a un regain d'intérêt récemment,», Écrit le FMI, bien qu'il soit difficile de savoir s'il existe vraiment intérêt à l'extérieur de l'imagination IMFs et certaines entités contrôlées par le gouvernement, comme les organismes de développement supranationales.

Historique de l'utilisation de DTS. (FMI)

Historique de l'utilisation de DTS. (FMI)

Pour contrer ce problème immédiatement, après la réunion du G20 sur Juillet 25, le directeur adjoint de la Banque populaire de Chine (PBOC) Bureau international Zhou Juan a déclaré une organisation internationale de développement comme le Infrastructure asiatique et la Banque d'investissement (AIIB) pourrait émettre des obligations en DTS en Chine en tant que fin Août, selon le journal chinois Caixin.

Zhu a fait écho à la fois Ocampo et le FMI et a déclaré que «les obligations libellées en DTS devraient être attrayante pour les investisseurs officiels à leur stade préliminaire, car ils peuvent fournir des produits d'investissement diversifiés et réduire le taux de change et les risques de taux d'intérêt."

La Chine a ouvertement appelé à la DTS remplacer le U.S. Dollar comme monnaie de réserve du monde. "La Chine a fait pression pour le DTS pour devenir plus largement utilisé pendant un certain temps, comme un moyen de contester la domination du dollar sans pousser le renminbi comme un concurrent direct,"Julian Evans-Pritchard, un économiste de la Chine chez Capital Economics à Singapour, a déclaré à Reuters.

Le FMI a fait une analyse et a conclu des instruments financiers libellés en DTS réduiraient la volatilité et le risque par rapport à la détention d'actifs en devises individuels et réduire les coûts, comme Zhu a dit ainsi. "M-DTS pourrait, donc, être attrayant pour les investisseurs et les émetteurs en offrant une option préemballé de diversification,"Fonds écrit.

Une solution pour les sorties de capitaux de la Chine?

Chine initié David Marsh, le fondateur de la finance think tank OMFIF (Monétaire et financier officiel Forum Institutions) a écrit le Marketwatch à la fin Avril environ un autre avantage du lancement de la M-SDR en Chine, bien qu'il ne parle d'une plus large gamme d'applications plutôt que l'émission par l'institution de développement.

SDR de l'initiative du marché des capitaux de Pékin permettra aux investisseurs nationaux chinois de souscrire à des émissions obligataires domestiques avec une composante importante de devises, un moyen d'aider les sorties de capitaux Humectez qui ont pris de l'importance dans la dernière 18 mois à la suite de la libéralisation progressive des capitaux.

En d'autres termes: Si les investisseurs chinois peuvent acheter des obligations ou d'autres titres de créance en DTS en Chine, ils pourraient contourner la contrôles de capitaux et maintenir un portefeuille diversifié d'euros, dollars, yen, et en livres avec une petite quantité de renminbi mixte dans. Et ils ne doivent pas sortir de leur chemin or la contrebande à travers la frontière de Hong Kong ou à acheter des clubs de football italiens.

Chine a perdu $676 milliards en capital 2015 réserves seules et étrangers devises sont presque le niveau critique de $2.7 billion (maintenant $3.2 billion), le minimum du FMI pense que le pays a besoin pour gérer l'économie.

Donc, il est sûr de dire le FMI a eu le même problème à l'esprit quand il a écrit son papier, dont les auteurs nous ne savons pas. À la mi-Juillet, il a déclaré:

En Chine, il peut y avoir une demande inexploitée chez les investisseurs nationaux pour l'exposition à la réserve
devises que les contrôles de capitaux sont progressivement levées. De cette perspective, M-DTS émis sur le marché onshore pourraient réduire la demande de devises et de réduire les sorties de capitaux en permettant aux participants du marché intérieur de diversifier leur risque de change.

Bien sûr, China, le FMI, et universitaires mondiaux trouveront une foule de problèmes la mise en œuvre de leur plan, y compris aucun mécanisme et de liquidité des questions d'équilibre du marché ou tout simplement un manque de demande pour un produit superflu que personne ne connaît ou ne comprend.

Superflu parce que les institutions de banques centrales à des fonds souverains gèrent déjà leurs propres portefeuilles de devises diversifiées et ne pas besoin du FMI pour leur dire quel poids est approprié pour leurs propres besoins.

Il n'y a pas de demande pour le produit parce qu'il a été autour depuis plus de 40 ans et il n'a pas été adopté par les acteurs privés. Les seules personnes qui demandent ce sont des fonctionnaires gouvernementaux et des universitaires et le seul véhicule pour les premières adoptions sont des banques d'État chinoises ou des institutions internationales contrôlées par l'État qui ne peut pas prendre une décision sur leur propre.

Mais des problèmes pratiques comme celles-ci ont jamais empêché le FMI ou la Chine.

Suivez Valentin sur Twitter: @vxschmid

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Une femme compte les factures de yuans chinois des milliers de dollars à Vancouver, Canada, le oct. 27, 2015. (Benjamin Chasteen / Epoch Times)Une femme compte les factures de yuans chinois des milliers de dollars à Vancouver, Canada, le oct. 27, 2015. (Benjamin Chasteen / Epoch Times)

L'économiste en chef de Citigroup est pas votre économiste en moyenne. Oui, Willem Buiter a étudié beaucoup de théorie économique à Yale et Cambridge mais il dit des choses drôles comme le État de New York Driving Test était sa «plus grande réussite éducative."

Il est également très franc pour quelqu'un qui travaille pour l'une des plus grandes banques dans le monde. Il pense que Citigroup "doit avoir décidé qu'il était préférable d'avoir quelqu'un qui dit la vérité à l'occasion que d'avoir quelqu'un qui raconte ce que les gens veulent entendre."

Epoch Times a parlé à M.. Buiter sur une éventuelle crise financière en Chine, une dévaluation des solutions de change et potentiels. [Passer 19:00 dans la vidéo]

Ils vont avoir une crise financière.

- Willem Buiter, Citigroup

Epoch Times: Quels sont les problèmes de la Chine?

Willem Buiter: La Chine a trois problèmes. Il dispose d'un fou surendettées secteur des entreprises, secteur bancaire, et l'ombre secteur bancaire qui a vraiment besoin de restructuration et de consolidation. Il a une capacité excédentaire massive dans la plupart des industries cruciales, donc il a un problème cyclique.

Et puis il doit rééquilibrer: De la croissance des exportations à la demande intérieure qui va de la croissance des investissements à la consommation; de la croissance des biens physique aux services; de je ne peux pas respirer au vert; et un rôle croissant pour le secteur privé. Cela est tout simplement pas le cas à l'heure actuelle.

Citigroup Willem Buiter, économiste en chef à une entrevue avec Epoch Times à New York en Juillet 6, 2016. (Epoch Times)

Citigroup Willem Buiter, économiste en chef à une entrevue avec Epoch Times à New York en Juillet 6, 2016. (Epoch Times)

La croissance a cessé de tomber au moment, mais il est nettement inférieur à ce qu'il était, mais seulement par des mesures de relance non durables.

Ceci est la croissance du crédit qui ajoute à l'effet de levier excessif. Les investissements dans les secteurs où il existe une capacité déjà excédentaire, essentiellement la construction d'un atterrissage plus grand et plus difficile en retardant les ajustements nécessaires.

Le rééquilibrage a été mis en attente parce que cela nécessite l'élaboration de politique active et innovante. Avec la campagne anti-corruption encore en plein essor, dans sa quatrième année maintenant et si quoi que ce soit l'intensification, tous les hauts fonctionnaires du ministère ou de la partie ne sont pas disposés à se mouiller et faire quelque chose non éprouvée et nouvelle. Le truc qui est nécessaire à la fois en termes de gestion de la stabilité financière, en termes de politique de stabilisation, le bon type de relance budgétaire et en termes de rééquilibrage.

Epoch Times: Ce qui peut être fait?

M. Buiter: Nous devons accroître le rôle du secteur privé pour réduire les entreprises publiques. Que se passe-t-il? Nous développons des entreprises d'État, car tel est le chemin de moindre résistance parce que nous savons comment faire.

Alors la Chine est dans un circuit d'attente, et je pense qu'il ne changera pas jusqu'à ce qu'il y est un rééquilibrage à long terme, jusqu'à ce que les questions politiques qui se reflètent dans la campagne anti-corruption sont réglées, il ne sera pas pris en charge par les politiques fiscales droite.

À moins qu'ils sont prêts à aller pour le chinois l'argent d'hélicoptère, relance budgétaire ciblé principalement à la consommation non à l'investissement. Oui, certaines dépenses en capital comme le logement social, le logement abordable, Oui, même certaines infrastructures.

Mais l'organisation infrastructure de soutien, pas les trains à grande vitesse au Tibet. Il doit être financé par le gouvernement central, la seule entité avec des poches profondes et il doit être monétisée par la Banque populaire de Chine.

Voilà ce que le pays a besoin et au moment où il est incapable politiquement pas techniquement d'atteindre ce genre de résolution. Je pense qu'il est peu probable qu'ils seront en mesure d'atteindre cet objectif sans au moins un ralentissement cyclique de quelque sévérité. Quelle est la profondeur dépend de la rapidité ils réagissent quand les choses commencent visiblement poire en forme va.

Les travailleurs vaquent à leurs tâches sur un chantier de construction de nouveaux magasins à Pékin sur Novembre 28, 2011.  (Goh Chai Hin / AFP / Getty Images)

Les travailleurs vaquent à leurs tâches sur un chantier de construction de nouveaux magasins à Pékin sur Novembre 28, 2011. (Goh Chai Hin / AFP / Getty Images)

Epoch Times: Quelle est votre estimation de la croissance du PIB chinois en ce moment?

M. Buiter: Quelque part ci-dessous 4 pour cent. Le chiffre officiel est toujours là 7 pour cent, mais ces données sont mises dans la cuisine statistique.

Epoch Times: Donc, si la croissance est 4 cent et les taux d'intérêt sont 8 pour cent, cela crée pas de problèmes?

M. Buiter: Les taux d'intérêt réels sont élevés en Chine. Surtout pour ce que j'appelle honnête, emprunteurs privés. La relation entre le taux d'intérêt au taux de croissance entraîne la dette à la dynamique du PIB. Le soi-disant effet boule de neige est défavorable lorsque le taux d'intérêt dépasse le taux de croissance et qui est probablement le cas actuellement.

Donc, il y a là un problème. Ils sont résoluble. C'est rien au-delà de la portée de l'homme. La roue n'a pas à réinventer, mais ayant les outils et être politiquement en mesure de les utiliser et disposés à les utiliser sont des choses différentes. La Chine a les outils, mais pas encore la volonté et la capacité de les utiliser de la manière qui est nécessaire pour éviter un atterrissage brutal.

Crise financière

Epoch Times: Donc, nous parlons d'un problème quelque peu similaire à celle en Europe. Nous aurions à écrire beaucoup de choses sur de mauvaises créances. Nous recapitaliser les banques et stimuler le consommateur pour obtenir l'inflation?

M. Buiter: En Europe, bien sûr, nous devrions vraiment financer les dépenses en capital. Les taux d'investissement sont notoirement faible en Europe. La Chine a le problème inverse. Ils ont besoin de stimuler la consommation. Donc, il y a une situation évidente gagnant-gagnant que nous pourrions avoir.

Restructuration de la dette, coupes de cheveux, si nécessaire, puis une relance budgétaire bien ciblé financé en fin de compte par la Banque centrale européenne (BCE), hélicoptère l'argent des gens. Chine visera à la consommation. La composition est différente parce que la Chine investit trop.

Vous pouvez avoir une bonne vieille crise financière sans avoir la 1997-1998 question asiatique de la dette extérieure, que la Chine n'a pas.

- Willem Buiter, Citigroup

Epoch Times: Que faire si la Chine ne traite pas le problème?

M. Buiter: Ils vont avoir une crise financière. Il peut être manipulé à cause 95 pour cent de la mauvaise dette est libellée en yuan, mais vous devez être prêt à le faire, vous devez être proactif.

Les États-Unis n'a pas eu un problème de la dette libellée en devises étrangères quand il a eu la grande crise financière. Les banques sont tombées sur. Ce sont tous les passifs libellés en dollars. Vous pouvez avoir une bonne vieille crise financière sans avoir la 1997-1998 question asiatique de la dette extérieure, que la Chine n'a pas.

Ainsi, une crise financière est un risque. alors, bien sûr, une forte dépréciation du yuan ce qui serait la conséquence si les réserves devraient être utilisées pour protéger les entités systématiquement importantes qui ont des dettes en devises étrangères. Ce serait la conséquence d'un défaut d'agir, une récession et, au pire des cas, une crise financière. Encore, quelque chose qui est survivable; Pas la fin du monde, mais très coûteux et politiquement déstabilisatrice.

Le chiffre officiel est toujours là 7 pour cent, mais ces données sont mises dans la cuisine statistique.

- Willem Buiter, Citigroup

Dévaluation

Epoch Times: Mais la monnaie devrait aller vers le bas.

M. Buiter: Je ne peux pas voir le yuan suit le dollar au cours de la prochaine année, et encore moins de deux ans, non. Je pense que pour le moment, le marché n'a plus peur d'une forte dépréciation éminente. Alors les sorties de capitaux entraînés par les attentes d'une forte dépréciation ont cessé. Mais ils pourraient être de retour comme ça, surtout s'il y a plus de kerfuffles en Europe, une autre Flare Up. Peut-être que la crise bancaire, et à la suite de nouvelles pressions à la hausse sur le dollar et d'autres monnaies refuges.

Et la monnaie chinoise est traîné le long? Je ne pense pas. Ils auront à découpler. Donc, qui est un canal qui, pour des raisons externes, la cheville de yuans pourrait devenir difficile à gérer.

Epoch Times: Comment voyez-vous le reste de l'année?

M. Buiter: Poursuite de la croissance modérée. La Chine est en train de flirter avec la perte de la foi dans sa capacité à gérer sa monnaie et flirter avec un net ralentissement de l'activité. Europe et le reste du monde industriel, en supposant que les négociations d'Brexit restent ordonnée, pas trop hostile et une croissance plus lente que l'année dernière, mais pas de façon spectaculaire plus lentement.

Si Brexit devient un combat de chiens entre la 27 et U.K. Si Brexit devient contagieuse, à travers des élections générales aux Pays-Bas en Mars l'année prochaine, En France, Allemagne. Si le référendum italien en Octobre ou Novembre de cette année va à l'encontre du gouvernement et de la peur de l'émulation de l'exemple britannique prend le relais, il pourrait y avoir un autre, ralentissement plus de l'activité.

nouveau Les États-Unis devrait putter autour à peu près de la même façon que l'année dernière. Donc, la croissance médiocre au mieux avec les risques baissiers principalement. Quelques marchés émergents et la Russie, Brésil fera mieux cette année que l'an dernier tout simplement parce qu'il est impossible de faire pire.

La roue n'a pas à réinventer, mais ayant les outils et être politiquement en mesure de les utiliser et disposés à les utiliser sont des choses différentes.

- Willem Buiter, Citigroup

Les chocs spécifiques, fait maison principalement au Brésil, les prix du pétrole comme partie externe en Russie et sanctions. Ces choses ne sont plus les ralentir dans la même mesure. Donc, une certaine reprise est possible.

Ça va être un monde de stagnation séculaire, à moins que nous fournissons la relance budgétaire monétaire combinée et à plus long terme, côté de l'offre, le renforcement des mesures visant à promouvoir la croissance, les dépenses en capital plus élevé, une meilleure éducation et de la formation, y compris la formation professionnelle, déréglementation sensée, moins d'impôts de disincentivizing et tout ce qui.

Toutes ces choses sont nécessaires pour maintenir la production potentielle à un niveau qui permet la réalisation de nos ambitions, mais même le niveau misérable du taux de la production potentielle de croissance ne sera pas atteint à moins que nous avons stimulus supplémentaire.

Epoch Times: Donc aucun moyen pour les stocks pour monter un autre dix pour cent d'ici?

M. Buiter: Tout est possible, mais je pense que les fondamentaux disent non.

Suivez Valentin sur Twitter: @vxschmid

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A woman counts Chinese yuan bills. (Benjamin Chasteen / Epoch Times)A woman counts Chinese yuan bills. (Benjamin Chasteen / Epoch Times)

He was right about subprime, right about gold, and early in his call for a Japanese crisis. Is Texan investor Kyle Bass too early in his call for a China banking crisis and currency devaluation within the next two years?

“It’s a foregone conclusion but we don’t know about the timing, it feels like it’s happening as we speak,” he told Grant Williams de RealVisionTV dans une interview. Bass had first stated his pessimistic view of China in late 2015 when the currency was under pressure and the country was bleeding capital to the tune of $100 billion per month.

Since February of this year and so-called Shanghai Accord or the G20 finance ministers, outflows have abated, although the currency has declined to a multi-year low of 6.66 per U.S. dollar.

There are so many perfect parallels to the U.S. mortgage credit system or the European banking system and the Chinese banking system.

— Kyle Bass, Hayman Capital
The exchange rate of the Chinese yuan versus the U.S. dollar over a year (Bloomberg)

The exchange rate of the Chinese yuan versus the U.S. dollar over a year (Bloomberg)

So why does Bass think the situation in China is intensifying? Everybody knows China has too much debt, especially corporate debt. Par conséquent, the country’s total debt to GDP ratio is higher than 250 percent according to a range of different estimates. This is not much higher than Japan’s government debt ratio of 245 pour cent du PIB, so why focus on China now?

“The Chinese corporate bond market is freezing up. Since April 11th the Chinese corporate bond markets had 150 cancellations out of 210 announced deals,», Dit-Basse. And indeed, the Chinese corporate bond market, which has helped keep unsustainable corporate debt afloat and also backs trillions in repackaged loans called Wealth Management Products (WMP) is in trouble in 2016.

La source: McKinsey

La source: McKinsey

Selon Bloomberg, Chinese companies raised 1.85 billion de yuans ($280 milliard) of onshore bonds between April and July this year, 30 percent less compared to the three preceding months.

Bankruptcies are also on the rise. Although corporate defaults are still in the low double digits, Chinese courts handled 1028 bankruptcy cases in the first quarter of 2016, en haut 52.5 percent compared to a year earlier.

“There are so many perfect parallels to the U.S. mortgage credit system or the European banking system and the Chinese banking system. There are things that go on in those systems that show you there are problems,», Dit-Basse, emphasizing the acuteness of these problems. “We see it starting now.”

While there are clear parallels to what happened in the United States in 2008 and Europe in 2010, Bass says that China’s problems are a magnitude larger. “They have asset liability mismatches in wealth management products that are more than 10 percent of their system. Our mismatches were 2.5 percent of the system and you know what they did," il dit.

According to Bass, the bad loans will first hit the banking system and then lead to a sharp devaluation of the Chinese yuan.

“How they deal with this, it’s not armageddon. They are going to recap the banks, the are going to expand the People’s Bank of China’s (PBOC) balance sheet, they are going to slash the reserve requirement, they are going to drop their deposit rate to zero, they are going tot do everything the United States did in our crisis," il a dit.

Dévaluation

All of these policy measures would lead to a depreciating currency all other things being equal. But China’s currency is already under pressure as mostly Chinese citizens are taking their money out of the country because they don’t trust the banking system any longer. Bass estimates that bad loans could lead to losses of up to $3 trillion or 30 pour cent du PIB. Chinese citizens’ savings are backing these loans and they don’t want to wait around to find out whether Bass’s number is correct or not. "En Chine, the credit excesses are already built in,», Dit-Basse.

They are going to do what’s best for China. And what’s best for China is to materially devalue their currency.

— Kyle Bass, Hayman Capital

Goldman Sachs estimated that net capital outflows from China in the first quarter of 2016 were around $123 billion according to a report, 70 percent of which came from Chinese citizens funneling money out of the country. They do this in spite of harsher capital controls in 2016 and use either illicit methods like smuggling or legal ones like buying up Vancouver and New York real estate.

According to Bass, there is no way out for the regime, which is trying to manage the devaluation as much as it can. "Le gouvernement chinois veut une dévaluation, they just want it on their terms.”

Reuters had previously reported that the Chinese central bank would not mind seeing the currency slip to 6.80 against the dollar, a target it will likely overshoot if things don’t change materially.

Bass also shines light on why the regime would not be opposed to devaluing the currency, albeit measuredly. He says one of president Xi Jinping’s closest aides, vice premier Wang Yang, thinks the Japanese made a mistake by not devaluing in the mid-1980s, right when they were blowing up their own credit bubble.

“Wang has said that he thinks Japan’s critical error was agreeing to the Plaza Accord. Japan decided to be submissive to the United States once again, to sacrifice their economic growth for that of the United States,” as the dollar devalued and the Japanese yen strengthened, the United States finally emerged out of a decade of stagflation. what happened to Japan at the beginning of the 1990s was less flattering. According to Bass, toutefois, this time will be different: “They are going to do what’s best for China. And what’s best for China is to materially devalue their currency.”

After the devaluation and the recapitalization of the banking system, toutefois, it’s time to buy again: “If you have any money left, it will be the best time in the world to invest. It will be the greatest time ever to invest in Asia.”

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A Chinese bank worker prepares to count a stack of US dollars together with stacks of 100 Chinese yuan notes at a bank in Hefei, Anhui Province, en mars 9, 2010. (STR / AFP / Getty Images)A Chinese bank worker prepares to count a stack of US dollars together with stacks of 100 Chinese yuan notes at a bank in Hefei, Anhui Province, en mars 9, 2010. (STR / AFP / Getty Images)

One thing is for sure, la Chinese yuan just had its worst drop on record ever since the last currency in 1994. The yuan lost 2.9 percent against the dollar since the end of March to 6.64 en juin 30.

Another sure thing: Brexit didn’t help as the yuan devalued almost one percent in a single day on the Monday after the historic vote. This is where the certainties end and where speculation and confusion starts.

Performance of the Chinese yuan (Bloomberg)

Performance of the Chinese yuan (Bloomberg)

It is speculation that China used the cover of Brexit to ease renewed pressure from capital outflows, which ebbed off to $20-$30 billion per month after $100+ billion run-rates in the first two months of the year. le 1 percent drop on Monday took the currency close to six year lows and could have been a welcome opportunity to do this, as everybody else was watching how markets in Europe reacted to the Brexit. Avant, China’s currency has been dominating headlines and global markets since the first surprise devaluation in August of last year and any sharp devaluation was not received well.

D'autre part, traders could have just taken some risk off the table because of the global spike in volatility. Another indication that the Chinese currency will enter the safe haven status anytime soon.

On the policy side, things are even more confusing. Despite the steep drop and relative volatility, Chinese state newspapers want the world to believe that there is no pressure on the currency. “Although the yuan’s mid-point fell against the U.S. dollar on consecutive days, the mood in both on-shore and off-shore markets is basically stable with no signs of panic-selling or a scramble for foreign currencies,” the Shanghai Securities News reported, citing industry experts as saying.

Panic selling is a vague term and may be more applicable to the British pound, but stability in the onshore and offshore yuan markets also looks different.

Although the regime is maximizing for stability, it doesn’t mind that Reuters quotes other government economists later in the week who claim the central bank would be happy to see the yuan at a rate of 6.8 par dollar. “The central bank is willing to see yuan depreciation, as long as depreciation expectations are under control,” Reuters cites unidentified sources.

The place to start getting things control: Unidentified economists.

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This long exposure picture shows apartment buildings and office blocks clustered tightly together in Hong Kong's Kowloon district, with the famous skyline of Hong Kong island in the background, le oct. 28, 2013.  (Alex Ogle/AFP/Getty Images)This long exposure picture shows apartment buildings and office blocks clustered tightly together in Hong Kong's Kowloon district, with the famous skyline of Hong Kong island in the background, le oct. 28, 2013.  (Alex Ogle/AFP/Getty Images)

À la surface, China’s capital outflows were only $30 billion in May, far below the $100 billion clip seen earlier this year.

So all is well in China? Not quite. We have seen that anecdotally people still strap cash around their waist and try to smuggle it across the border.

Chinese companies still make strange acquisitions to be able to move capital to other countries, like this home appliance maker buying an Italian soccer club.

Another statistic is quite telling that not all is as it seems. Chinese imports from Hong Kong skyrocketed 242 percent in May compared to last year and 21 percent compared to last month.

Why is this strange? Because Hong Kong exports to China (exactly the same thing, except for it’s a different agency reporting the numbers) have been falling this year, comme 4.8 percent year over year in April. Aussi, total imports including Hong Kong were down 10.3 pour cent au cours de l'année.

“Another interesting contrast is the trade data of Hong Kong, though it has not out for May yet, Hong Kong exports to China has contracted for 12 months when for most of the time China imports to Hong Kong was rising,” writes investment firm Natixis in a note to clients.

(IIF)

(IIF)

The discrepancy is literally off the charts. So how can this be? Most analysts agree that Chinese companies hand in fake invoices to the regulator so they can wire money to Hong Kong and circumvent the limits on outbound money flows.

“The over-invoicing of imports, particularly via Hong Kong, remains a source of capital flight, though it only accounts for around 2 percent of total imports,” the International Institute of Finance (IIF) writes in a note.

In the past and during the time when China accumulated its vast stash of foreign exchange reserves ($4 trillion at the peak in 2014) this flow was reversed and exports to Hong Kong from China were rising while Hong Kong imports from China were stable.

“The China-Hong Kong trade is a channel of speculative flows. We called these flows ‘speculative’ because these flows ride on the trend of the yuan movement and brought capital into China when the yuan appreciated. It is logical that the reverse happens now as the yuan depreciates,” writes Natixis.

(IIF)

(IIF)

According to Natixis, trading companies in Hong Kong and the mainland partner with commodity companies dealing in scrap metal and scrap plastic. “The goods do travel across the borders although the value of the goods could be in question.”

Given the discrepancy in what essentially should be the same number, there is no question the value of the good is inflated to funnel money out of the country. According to Natixis, this could even be beneficial for regulators:

“For regulators, knowing the existence and the size of speculative flows is better than closing down the channel and knowing little about a black market.”

Suivez Valentin sur Twitter: @vxschmid

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After market crises, it sometimes takes a while for the real picture to emerge, the reasons why Western stocks followed the Chinese currency down at the end of 2015.
So it is only now that we learn how much money international banks withdrew from China in the fourth quarter of 2015 and how this unwind of lending caused a liquidity squeeze, thanks to minute data aggregation from the Bank of International Settlements (BIS).
"Le $114 billion decline in cross-border lending to China was the second quarterly drop in a row, and it pushed the annual growth rate down to –25 percent,” the BIS states in its quarterly review published this June.
The trend of lending to China has clearly turned. (BIS)
En d'autres termes, global bank lending to China crashed by one full quarter. No wonder the currency weakened and liquidity in global financial markets decreased throughout the year as volatility peaked right around the first Fed rate hike in December. Au total, cross-border banking liquidity decreased by $651 milliards de $26.4 billion.
Celles-ci $26 trillion in cross-border claims could be anything related from trade finance to derivative contracts which cross two banking jurisdiction. Par exemple, a U.S. bank lending money to a Chinese company in the form of a loan or a bond. It also includes interbank lending. Once the loans are paid back, this credit money goes out of existence, thereby decreasing overall system liquidity.
Total bank lending to China is now down $304 milliard, ou 27 percent from a high of $756 reached in September of 2014, which also coincides with the peak of Chinese foreign exchange reserves of $4 billion (maintenant $3.2 billion).
This repayment of debt to foreign banks is only part of the $676 billion which left China in 2015 according to the International Institute of Finance (IIF). The rest has been mostly Chinese households and companies moving their money abroad and Chinese companies repaying debt to non-bank creditors.
le $800 billion decline in foreign exchange reserves over two years resulted from the People’s Bank of China’s (PBOC) intervention in the currency markets to keep the yuan stable against the U.S. dollar.
(Economie de Capital)
Global Contagion
The BIS report also details how closely Chinese banks are tied into the global financial system.
Chinese banks, after paying back much of their international liabilities in 2015 are still lending $529 milliards U.S. dollars to the international financial system. According to the BIS, they have a $300 billion surplus (more assets than liabilities) and are funding these assets with dollars obtained from mainland companies and households.
The BIS cautions that shocks can come not only from debtors like the Asian Tigers in the late 1990s but also from creditors as well:
“As the Great Financial Crisis of 2007–09 demonstrated, it is as important to monitor potential shocks emanating from creditors as those from borrowers. en outre, the existing international banking statistics underestimate the overall increase in the indebtedness of those countries relatively more reliant on credit from China.”
(BIS)
At this moment, Chinese citizens and companies are still trying to get their money out of the country and are happy to do so with the help of Chinese banks. If that situation changes and Chinese players want to hold their dollars outright or need to service debt obligations in yuan because of a falling economy, this liquidity could very quickly disappear from the global financial system.

Read the full article here

While Chinese capital flows dominated headlines earlier this year, they have not garnered much attention since the end of February.
But as the yuan is slipping again against the dollar, outflows are back in May and the People’s Bank of China’s (PBOC) stash of foreign reserves declined as well (down $28 milliards de $3,192 billion).
Most of this was due to the so-called valuation effect, which decreases the value of assets in currencies other than the dollar as the dollar rises in international markets.
However, research firm Capital Economics estimates Chinese still moved around $30 billion out of the country. ” an increase in outflows would seem to make sense given the weakening of the renminbi against the dollar last month,” the firm writes in a note to clients.
(Economie de Capital)
Looking at actual transactions happening on the ground, it seems Chinese are still quite desperate to move their money out or to safety. They are overpaying for Bitcoin and are loading up on gold for example.
Other go the traditional route, like this Chinese man, who tried to smuggle $74,000 worth of U.S. dollar bills out of the country to Hong Kong on June 3, selon le South China Morning Post. The legal limit is $5000.
(Youth.cn)
Other take the legal route, like Chinese home appliance retailer Suning Commerce Group. They just bought a 68.55 percent stake in Italian soccer club Inter Milan for $307 million.
While being perfectly legal and in accordance with PBOC rules—Suning got approval for the acquisition—it is nonetheless unclear what value added there is for a home appliance retailer to own a soccer club. As long as the cash it out of the country, this does not seem to matter, bien que.
For Suning president Zhang Jindong, the move is still strategic: “The acquisition of Inter is a strategic move. Ours is an international business and our brand will soon be big in Europe too.”
Despite these seemingly desperate measures of Chinese citizens and companies to get out of the yuan and into relative safety, Capital Economics is optimistic we won’t see a repeat of last year’s currency crisis. It began with a surprise devaluation of the yuan in August, the biggest risk factor being a Fed rate hike next week.
“Depreciation expectations remain much more manageable than in late-2015 and early-2016 when China was witnessing outflows of over $120 billion per month. But rate hikes by the Fed are likely to be back on the agenda soon and, when that happens, there is a good chance that outflows could pick up again.”


Suivez Valentin sur Twitter: @vxschmid

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Les commerçants chinois aiment spéculer sur tout ce qui est pas boulonné. Ils ont donc pris efficacement sur la monnaie virtuelle Bitcoin, représentation 90 pour cent des volumes d'échanges mondiaux. Et si la négociation du crypto-monnaie Bitcoin volatile ne suffisait pas, BitMEX leur offre la possibilité d'utiliser l'effet de levier ainsi.
«Notre objectif est de laisser quiconque parier sur quoi que ce soit à tout moment,"BitMEX fondateur Arthur Hayes a déclaré à Bloomberg. Le 30 ans ex-Citigroup trader fondé BitMEX à Hong Kong il y a deux ans, modélisation après le Chicago Mercantile Exchange (CME). Le CME permet aux commerçants d'acheter ou de vendre de grandes quantités de matières premières ou d'instruments financiers mettant peu d'argent vers le bas.
Ce processus est appelé à spéculer sur la marge, un processus BitMEX a pris le monde de crypto-monnaie. Traders doivent déposer Bitcoin (ou d'autres cryptocurrencies) au lieu de dollars ou d'euros ou de yuans pour financer leurs comptes.
Ils peuvent ensuite utiliser un Bitcoin pour acheter une valeur de contrat 100 Bitcoin-100 fois l'effet de levier et maximale de l'échange BitMEX facture des frais de 0.005 pour cent pour chaque transaction.
Comme pour le change réel à terme à Chicago et ailleurs, tous les commerçants font entre dans un contrat légal, qui est réglé en espèces (ou cryptocash dans ce cas) après son expiration ou le commerçant est arrêté sur. Immobilier bitcoins, altcoins, éther, ou daos-all cryptocurrencies-ne change de main.
Dans l'exemple ci-dessus, un commerçant peut acheter une valeur de contrat 100 Bitcoin pour une seule bitcoin. Si le prix monte 5 pour cent le professionnel 5 Bitcoin ou 500 pour cent de retour sur son origine 1 investissement bitcoin. However, si les baisses de prix 1 pour cent, il perd 100 pour cent ou la totalité de son investissement initial. Il n'y a aucune chance d'acheter et de détenir, ou attendre que le prix récupère.
Ceci est similaire à des échanges de propagation-paris réguliers comme Alpari ou les magasins de seau des années 20 rugissantes.
Un aperçu de la négociation tableau de bord BitMEX (BitMEX)
Les algorithmes du change et des programmes informatiques assurez-vous que les gagnants et les perdants toujours dehors à zéro, nouveau semblable à la véritable échange à terme. However, à la différence du modèle de rôle, gagnants peuvent être invités à subventionner les perdants parfois.
"Contrats BitMEX ont un effet de levier. Dans de très rares cas, les bénéfices peuvent être réduits au cours de certaines périodes de temps, s'il n'y a pas assez d'argent sur l'échange pour couvrir les bénéfices des utilisateurs,"Il est dit sur le site Web de l'entreprise.
La société veut élargir son offre au-delà de cryptocurrencies donc les spéculateurs chinois peuvent parier sur indices financiers occidentaux et les stocks et les Occidentaux intéressés par les actions chinoises peuvent miser sur les marchés financiers du continent.
Alors que la Chine a réglementé les transferts d'argent entrant et sortant et les investissements, Bitcoin peut circuler librement, rendant possible pour les Continentaux et les Occidentaux de fonder leur compte et commencer à paris.
Parce qu'ils ne sont pas vraiment acheter ou vendre quoi que ce soit et simplement conclure des contrats, BitMEX n'a ​​pas besoin de se soucier de déplacer les produits financiers sous-jacents.
Jusque là, l'entreprise est loin de son objectif d'avoir «quiconque parier sur quoi que ce soit," toutefois. Chinoise ne peut parier sur U.S. les taux d'intérêt du dollar (un contrat) et les Occidentaux ne peuvent miser sur l'indice des actions FTSE China A50 (un contrat.)

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Last time around, the love affair with China and the virtual currency Bitcoin didn’t end well. In December of 2013, the Chinese central bank barred financial companies from having anything to do with Bitcoin and the price crashed from $1095 à $105.
However, this love has been rekindled as the virtual currency quietly rose from $200 En août 2015 à $525 maintenant.
“It went down for many reasons in 2014, the most important one was that it was too high. These days Chinese activity is driving the ascent in the price of Bitcoin. There is not a lot of other factors going on right now,” says Gil Luria head of technology research at Wedbush Securities.
If you are willing to get capital out of China badly, then you are willing to take the risk. — Gil Luria, Wedbush Securities

Coincidently, Bitcoin reached its bottom just after the surprise devaluation of the Chinese yuan against the dollar and about the time ordinary Chinese started to move money out of the country in earnest. Some of it leaves China via Bitcoin.
“In countries … that struggle with high inflation and capital controls you see a move toward bitcoin,” Tuur Demeester, editor in chief at Adamant Research, said in an interview with RealVisionTV.
Safe Haven?
The Chinese economy is struggling and the banking system is loaded with bad debt.
Demeester likens the recent rise in Bitcoin to what happened in Cyprus in 2013 when Bitcoin first became mainstream news. As the banks in Cyprus closed down, the virtual currency rose from $15 to over $230 in the span of a couple of months.
Price of Bitcoin against the U.S. Dollar (Coindesk)
“The price was going nowhere for the last two years, but in the past year, we have seen these trends. Back in 2013, Cyprus was the reason why Bitcoin spiked in April 2013. Bitcoin survived but the money that was in the bank didn’t,” Demeester says.
Bitcoin during the Cyprus banking crisis (Coindesk)
That may be the reason why Chinese are willing to pay hefty premiums to buy Bitcoin to get rid of the risk of holding bank deposits in yuan.
Par exemple: The price of one bitcoin in yuan on June 1 était 3608. This is equivalent to $548. But the dollar price of Bitcoin was only $525, une 4.4 percent premium.
en outre, even if the objective is to get rid of yuan, there are violent price moves even in U.S. dollars, like during the 2014 crash. So an ordinary Chinese citizen is paying up and taking a lot of price risk just to get rid of the Chinese currency.
The amount of money that can be transacted via Bitcoin is unlimited.

“If you are willing to get capital out of China badly, then you are willing to take the risk,” says Luria.
Since there are no transaction costs for shifting from yuan into Bitcoin and from Bitcoin into dollar, it means traders think the Chinese currency is at least 4.4 percent overvalued compared to the U.S. dollar.
“Even though 60 percent of the new supply of bitcoin comes out of China, despite that you have these positive spreads on Chinese exchanges,” says Demeester.
The amount of money that can be transacted via Bitcoin is unlimited—at least in theory—as Bitcoin is not part of the limitation on overseas money transfers and investment opportunities.
“You can take Bitcoin out to anywhere in the world and that’s a way to get capital out of China,” says Luria.
Chinese can open overseas bank accounts while traveling and then exchange their bitcoins for foreign currency in their new bank accounts. Direct transfers to overseas bank accounts are limited, but this roundabout way is not.
While the price moves and discrepancies are exciting, but the total amount of Bitcoin in circulation ($8.3 milliard) is tiny compared to the Chinese banking system ($35 billion) and even compared to the total amount of capital that left China in 2015 ($676 milliard).
We cannot ignore the revolutionary changes it brought to the financial sector. , Cyberspace Administration of China

However, China is the world leader in Bitcoin mining (the mathematical process through which new bitcoins are created) as well as Bitcoin trading. Chinese Bitcoin exchanges account for as much as 92 percent of global volumes (autour $22.5 billion during the last 30 journées).
Bitcoin Ban
So didn’t China ban Bitcoin at the end of 2013? And why did the price crash so much?
In short, the answer is no, China did not ban Bitcoin. China barred financial companies (including the big, non-bank payment providers like Alibaba’s Alipay) to deal with Bitcoin. It did not ban Bitcoin exchanges like Huobi or the transfer of bank deposits in exchange for bitcoins.
“The Chinese government [était] highly worried that, if the banks and Alipay connect directly to the Bitcoin infrastructure, the banks or Alipay will do something really stupid and the government will have to bail them out,” Joseph Wang of Bitquant wrote in a blogpost.
So there was a good reason for the steep price decline after the Chinese added this regulation. By prohibiting big payment companies like Alipay to use the virtual currency, China ensured that Bitcoin would not become the currency of choice for sales of goods and services, especially in its booming online market.
“Merchant fees in China are lower than in the West and platforms such as Alipay and WeChat or Tenpay dominate the mobile and non-bank payment market,” writes Coindesk’s Aiga Gosh.
Using Bitcoin for real live transactions is an important driver of demand for the virtual currency. If this factor of demand is removed, the price must fall, although the Cyberspace Administration of China has recently used softer tones when talking about the currency in October of 2015:
“Although some people think that Bitcoin and its underlying technology, the Blockchain, is not stable, we cannot ignore the revolutionary changes it brought to the financial sector. The new technology has led to the expansion of a distributed payment and settlement mechanism, which will innovate financial transactions.”
(le journal Wall Street)

Pure Speculation
So using Bitcoin as a payment for goods and services in China has been removed from the equation,

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Récemment, Chinese have been associated with getting their money out of the country because of the weak economy and a possible debt crisis.
Those who are not getting their money out by buying Vancouver real estate or Italian soccer clubs have found another solution to the economic uncertainty: Gold ETFs.
The Chinese segment of this almost 2000 ton global market is tiny (20 tonnes), but those holdings doubled in the first quarter of 2016 compared to the first quarter of 2015, according to a report by the World Gold Council.
(World Gold Council)
The most popular Chinese Gold-backed ETF (Huaan Yifu Gold) increased its holdings by almost 30 pour cent à 13.5 tons in the first quarter compared to the end of 2015.
Globally, gold ETFs increased their holdings by 364 tonnes, the highest number since the first quarter of 2009 contributing the most to gold’s strongest first quarter of the year on record. Total demand was 1290 tonnes, en haut 21 percent compared to the same period in the year before.
“The noxious atmosphere of uncertainty created by global monetary policies and shifting expectations for U.S. interest rate rises were cause for concern. Investors sought the safety of gold,” the report states.
(World Gold Council)
The report also mentions the threat of a Chinese devaluation caused the spike in gold demand. Being at the epicenter of these worries, Chinese also loaded up on physical gold and increased their purchases 23 percent compared to the end of 2015. They bought 62 tonnes.
“I think many Chinese understand if they buy gold in China with renminbi, they are also hedged against such a devaluation, so there is no need for normal Chinese to use gold and bring it out of the country when they made their money in an honest way,” says Willem Middelkoop, author of “The Big Reset.”
Another reflection of this shift in consumer sentiment in China is the fact demand for gold jewelry actually decreased 4 percent over the quarter and 17 pour cent au cours de l'année (216 tons to 179 tonnes).
The Chinese central bank, while defending its currency against massive capital outflows has also continued to load up on gold.
“Russia and China–the two largest purchasers last year–continue to accumulate significant quantities of gold,"Indique le rapport. La Chine a ajouté 35.1 in the first quarter and it looks like the made a good investment. Gold outperformed all other asset classes in the first quarter:
(World Gold Council)

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Mai 26, 2016

Nobody knows whether the Fed will raise rates again in June, not even Fed officials.
So it seems kind of pointless Chinese officials would ask their U.S. counterparts whether there would be a rate hike as Bloomberg reports, citing people “familiar with the matter.”
En fait, NOUS. officials may ask their Chinese counterparts whether raising rates would not hurt anybody. San Francisco Fed President John Williams said as much during a speech at the Council on Foreign Relations this week.
“I don’t know what will happen in June, it depends on the data,” with data meaning uncertainty and capital flight in China. “It’s a factor in the decision for June and we could hold off until July.”
One thing, toutefois, is certain. When a Fed rate hike becomes more likely, the Chinese currency feels the pressure—it’s down almost one percent over the past month to 6.56, which is a lot for the centrally managed exchange rate and very close to the 6.59 level reached in January this year.
(Google Finance)
And with the best estimate for second quarter U.S. PIB, a key input for the Fed in its rate decision, being upgraded from 2.5 pour cent à 2.9 pour cent, the rate hike is becoming ever more likely.
(Atlanta Fed)
This dynamic, bien sûr, isn’t new. Ever since the Fed stopped it’s Quantitative Easing (QE) program in December of 2013, les Etats Unis. dollar hit rock bottom against the yuan and has appreciated 8 pour cent. She steepest increase happened in the second half of 2015 when markets finally believed the Fed would hike rates for the first time since 2006.
(Google Finance)
“That means the Fed still has a ‘China problem’: any effort it makes to tighten policy will, once more, activate the feedback loop and suck capital from China with what are now predictable consequences,” Citigroup’s David Lubin writes in a blog post.
Investment bank Nomura, toutefois, believes that this episode is different from what happened last year in August when the yuan devalued 4.5 percent over a few days:
"[The yuan] is trading close to the actual fix [the central bank sets this rate], which suggests the downward pressure on the yuan is not as severe as last year. de plus, the yuan has generally been underperforming its peers since the August devaluation.”
According to the investment bank, the weakness against other currencies already includes some of the weaker Chinese economic data and therefore does not necessitate another sharp devaluation.
(Nomura)
“The August devaluation thus occurred with falling confidence in the economy and market participants saw the devaluation as confirmation of a much weaker Chinese economic picture than before.”
But what about the Fed? Nomura thinks the first rate hike in December was as bad as it gets: “While there have been gyrations around Fed hike expectations, the first hike is behind us.”
If the worst is not behind us in terms of market volatility and a crashing Chinese currency, John Williams has the solution: “We can always move interest rates back down.”

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After the market fireworks at the beginning of the year, things started to quiet down at the end of February right after the G20 meeting in China. This quiet is about to end if we take the Chinese currency as an indicator.
Markets were worried the yuan would crash against the dollar with some hedge fund managers even betting on a 50 percent decline in 2016. China’s stock market crashed some 25 percent in January and the S&P 500 lost almost 10 percent at its low point in February.
After the unofficial Shanghai Accordsnamed after the place of the G20 meetingthis concern receded as the U.S. dollar weakened and emerging market currencies including China’s yuan appreciated. The Federal Reserve played a part as it skipped raising interest rates during its first meetings in 2016 and Chinese capital outflows markedly slowed from March onwards.
So the yuan hit a relative high against the dollar in March at 6.45, S&P 500 made it to green for the year, but it seems this was as good as it gets.
For no apparent reason, the yuan then started to decline and is approaching the January lows of 6.60 par dollar.

At the beginning of May, Australia defected from the rest of the world’s central banks by cutting interest rates in an effort to weaken its currency, breaching the agreement to let the dollar weaken across the board.
En mai 18, the Federal Reserve released the minutes of its March meeting, indicating it may just raise rates again. This led to a sharp sell-off in the Chinese currency and prompted the People’s Bank of China (PBOC) to intervene in the currency markets to strengthen the yuan.
The Chinese economy and possible capital outflows are coming to the forefront of analysts and traders again.
Read MoreChina Expert Evan Lorenz Says Yuan Devaluation Will Happen
“China’s macro [economic picture] may weaken (against the recent consensus of a cyclical upturn) and there is a risk that capital outflows will pick up again,” the investment bank Nomura writes in a note to clients.
Ever since the Fed started to tighten global liquidity at the end of 2013, les Etats Unis. dollar has steadily crept higher, conversely pulling the yuan lower. Depuis 2015, the falling Chinese currency has preceded market turmoil in the fall of last year and at the beginning of this year.
Now all eyes are on the Fed which meets on June 16-17 and is highly likely to raise rates, at least according to best-selling author James Rickards:
“I think in June, particularly after having skipped March, they’re going to want to get back on track. They’re going to raise rates, but the market expectation is still not better than 50 percent that they will,” he said right when the dollar put in a bottom in March.

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À la surface, things are quite straight forward: China has been growing fast thanks to a historic expansion in debt and recently failed to transition its economy from investment in things that don’t move to consumers who move around and buy stuff.
It has taken the market quite some time to come to that conclusion as most people thought the central planners in Beijing were invincible. Maintenant, the sentiment is more negative, despite another ramp up in debt and investment to stabilize the economy in early 2016.
(Macquarie)
Investment bank Macquarie, toutefois, goes against the grain and says China’s debt problem is misunderstood and there is untapped potential in the Chinese economy.
First of all, Macquarie states the debt is not the problem: “Focusing on debt misses the main point: debt under state capitalism is different from that in market economy,” it states in a report.
State capitalism in China’s case means China controls who lends and who borrows by owning most of the banking system as well as the State Owned Enterprises (SOE). It also writes the accounting rules and can tell banks to roll over debt indefinitely. China’s banking system was bust at the end of the 1990s and the regime swept the problem under the rug by setting up bad banks and using accounting gimmicks to forget about the problem.
In principle, the regime could do this again, although it likely won’t get away scot-free this time. “The hope, again similar to the 1999 crise, is that nominal growth will grow enough to reduce the debt to GDP ratio to a manageable proportion. However, given the environment of slow growth amid collapsing productivity, such a strategy could instead lead to the scenario of Japan’s ‘lost decade’,” the Institute of International Finance states in a report.
(Macquarie)
Declining capacity utilization rates are only one indicator that a lot of capital and labor was wasted and therefore won’t generate much nominal GDP growth in the future without further increasing debt.  
Another thing has changed from 15 il y a des années: China doesn’t control its depositor base as tightly as before. Chinese savers, who are the ultimate lenders in the Chinese economy, were mostly confined to saving money in the form of bank deposits. And although bank deposits still make up the majority of savings, Chinese savers have used the liberalization of the financial system to get money out of the country.
Even the state controlled companies (who can also be savers, depending on the sector and company) have ramped up overseas investments, contributing to the $676 billion in outflows in 2015. Macquarie also notes “foreign asset accumulation is more of a concern,” now and that outflows have a significant impact on China’s monetary policy.

As for the positives, Macquarie buys into the themes of further urbanization as well as increases in productivity, consumption, and services. The key point according to Macquarie, which may indeed be missed by the markets, is that more than 56 percent of the population lives in the cities, but only 40 percent have been properly registered under the Hukou residency system.
It also notes that China’s top four cities contribute less to the country’s GDP than either London or Tokyo, which is why there is further upside. And while most observers agree that a reform of the Hukou system would liberate millions of Chinese others doubt the service and consumer revolution that Macquarie thinks is going to happen just because it churns out more college graduate than everybody else.
(Macquarie)
“Sheer numbers of graduates are not translating into talent that can turn ideas into scalable businesses,” Eric Roth, head of Mc Kinsey’s Global Innovation and Growth Practice, wrote on the company’s blog.
“Chinese companies have an abundance of structures and processes, but suffer from the inability to translate these into an increased stream of value-creating innovation.

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