En mann sjekker kinesiske yuan regninger i Beijing juli 28, 2015. Den yuan avtar mot dollar og Bitcoin som kinesisk flytte penger ut av landet. (FRED DUFOUR / AFP / Getty Images)En mann sjekker kinesiske yuan regninger i Beijing juli 28, 2015. Den yuan avtar mot dollar og Bitcoin som kinesisk flytte penger ut av landet. (FRED DUFOUR / AFP / Getty Images)

Den kinesiske valutaen, yuan, er en merkelig dyr. Knyttet til dollar, den beveger seg-men neppe når den gjør, finansmarkedene får nervøs, spesielt når det kommer ned.

Den yuan tapt 1.1 prosent mot dollar i oktober, som ikke synes like mye. Det er det som er bak en prosent trekk som har markeder på kanten.

Ifølge investeringsbanken Goldman Sachs, så mye som $500 milliarder i hovedstaden har forlatt Kina i år til september. Kinesiske selskaper og borgere, samt utlendinger, konvertere sine yuan beholdningene i dollar og andre valutaer, flytting prisen på yuan ned. Avgangen plukket opp spesielt i september, nå $78 milliarder.

gsyuanoutflow

Hvis det ikke er økt etterspørsel etter yuan fra handelen, for eksempel, prisen på valutaen har å gå ned for å justere for ubalanse i etterspørselen etter utenlandsk valuta. Fundamentalt, Dette er et mistillitsvotum i den kinesiske økonomien. Hvis risiko og avkastning for kinesiske eiendeler var gunstige-som de var for det meste av det siste tiåret-kapital vil strømme inn i Kina og ikke ut.

regime innblanding

derimot, det kinesiske lederskapet ønsker å begrense synligheten av denne mistillitsvotum og gi inntrykk av finansiell stabilitet, så det er bruk to spaker å skjule farten.

Først, det er salg av sin en gang så mektige stash av offisielle valutareserver, ned fra $3.33 billioner i januar til $3.17 billion ved utgangen av september. I august 2014, det var nær $4 billioner.

Det er rett og slett en overføring av offentlige kinesiske valuta eiendeler til private hender intermediated gjennom globale finansmarkedene. Hvis mengden av utenlandsk valuta kjøpt av privat sektor og solgt av de offisielle sektor kampene, virkningen på prisen på valutaen er begrenset.

For eksempel, Kinesiske offisielle beholdning av US-. Statsobligasjoner er ned fra $1.25 billioner i begynnelsen av året til $1.19 billioner på slutten av august. derimot, Kinesiske bedrifter har enten gjennomført eller annonsert $218.8 milliarder i fusjoner og oppkjøp av utenlandske selskaper i år, ifølge Bloomberg data.

(Bloomberg)

(Bloomberg)

Resten av posten bedriftens kjøper rangel ble finansiert av kinesiske statlige banker og andre valutareserver holdt på Folkets Bank of China (PBOC).

Kinesiske selskaper har tidligere investert i stålverk og kullgruver som det ikke i morgen. derimot, fordi industri og bergverk har massive overkapasitet og gjeldsproblemer, Kinesiske selskaper er ute utenlands for bedre investeringer.

Men det er ikke bare kinesiske bedrifter som plutselig oppdager verdien av eiendeler i utlandet. Kinesiske borgere har også vært aktive kjøpere av utenlandsk eiendom og aksjer. Kjøp av aksjer notert på Hong Kong børsen etter fastlands borgere, for eksempel, traff en rekordhøye $12 milliarder av kjøpsordre i september, opp 64 prosent fra august.

kapitalkontroll

Så det kinesiske regimet trekker den andre spaken for å begrense utbetalinger: kapitalkontroll. Overføring av kapital for borgere har allerede begrenset oppad til $50,000 per år, slik at folk funnet smarte måter rundt denne grensen. Som å kjøpe millioner verdt livsforsikringsprodukter, en form for kapitalinvestering, i Hong Kong for eksempel med sin Union Pay debetkort. Men ikke nå lenger.

Per oktober 29, de kan bare bruke sine UnionPay kort til å kjøpe forsikring knyttet til reise, ifølge UnionPay Co. Fastlands besøkende kjøpt $3.9 milliarder av forsikringsprodukter i Hong Kong i første halvår, i henhold til byens forsikringsbransjen regulator, en økning på 116 prosent i samme periode 2015.

Regimet fortsetter også å slå ned på underjordiske banker som letter kapitalutgang. Ifølge rapporter fra fastlandet papir Financial News, State Administration of Foreign Exchange (SIKKER) beslaglagt $8.4 milliarder i valutafond under en gransking i slutten av oktober.

Så i motsetning til de fleste statseide selskaper som er snapping opp utenlandske eiendeler med velsignelse av regimet, Kinesiske borgere må finne andre måter å redusere sin eksponering mot den kinesiske økonomien. De er lei av de lave rentene på bankinnskudd og blir stadig mer redd for risikoen ved de uregulerte rikdom management produkter.

(HSBC)

(HSBC)

En kanal som fortsatt synes å fungere er flyten av yuan fra fastlandet til offshore sentre som Hong Kong og Singapore. Goldman estimater $45 milliard ut av $78 milliarder i september utbetalinger ble overført fra fastlandet bankmarkedet til offshore yuan markedet, hvor det ble sannsynligvis konvertert til utenlandsk valuta.

Offshore yuan (CNH) har mistet 4.8 prosent mot Hong Kong dollar siden mai hvor den innenlandske motstykke (CNY) bare tapt 4 prosent, indikerer mer salgspress på offshore yuan.

et annet kjøretøy, brukes mest når alt annet svikter, er den elektroniske valuta Bitcoin. Etter å ha flyttet sidelengs for det meste av sommeren, prisen eksplodert siden slutten av september, sammenfallende med de nyeste tiltak for å begrense kapitalutgang og fallet i yuan. Alas, det er litt mer volatil enn sin offisielle motstykke. Den er oppe 23 prosent til $705 siden september. 25, uten regime innblanding og for alle å se.

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A sign hangs on One Chase Plaza in lower Manhattan on Oct. 14, 2014 in New York City. 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 in New York City. 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 billion in the first half of 2016, up three times compared to the same period last year, and even higher than all of last year ($15.3 milliarder).

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

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. Med 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.

Screen Shot 2016-07-25 at 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 (SIKKER) 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.

Screen Shot 2016-07-25 at 2.07.12 PM

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.

Mer enn 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 milliarder, in consumer products sector. And the second largest was Wanda’s purchase of Legendary Entertainment for $3.5 milliarder, 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 milliarder) and automotive (Ningbo Joyson’s acquisition of Key Safety Systems for $920 million).

Financial investments (investments for financial returns) amounted to $3.5 milliarder, eller 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.

Screen Shot 2016-07-25 at 2.07.35 PM

Outlook

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, according to the report. Major M&A transactions include HNA Group’s $6 billion bid for technology distributor Ingram Micro, Anbang’s $6.5 billion acquisition of Strategic Hotels & Resorts, and Apex Technology’s acquisition of Lexmark for $3.6 milliarder.

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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En bankansatt teller 100-yuan sedler i en bank i Hangzhou, øst Kinas Zhejiang-provinsen desember 1, 2015. Det internasjonale pengefondet anerkjennelse av Kinas valuta er et skritt i retning av å oppmuntre sin globale bruk, men bankene vil være motvillige til å holde yuan mindre Beijing presser dypere økonomiske reformer, analytikere sier.          (Bilder STR / AFP / Getty)En bankansatt teller 100-yuan sedler i en bank i Hangzhou, øst Kinas Zhejiang-provinsen desember 1, 2015. Det internasjonale pengefondet anerkjennelse av Kinas valuta er et skritt i retning av å oppmuntre sin globale bruk, men bankene vil være motvillige til å holde yuan mindre Beijing presser dypere økonomiske reformer, analytikere sier.          (Bilder STR / AFP / Getty)

For folk flest, SDR lyder som en merkelig sykdom. Og fortsatt, det kan være ordets neste reservevaluta, i hvert fall hvis Kina og Det internasjonale pengefondet (IMF) får sin vei.

Den såkalte Special Drawing Rights (SDR) er en IMF konstruere av faktiske valuta, akkurat nå euroen, yen, dollar, og pund. Det gjorde nyhetene i fjor da den kinesiske renminbi ble også innrømmet, selv om det ikke vil formelt være en del av kurven til 1 oktober i år.

IMF medlemmer har det og kan bytte den med hverandre for faktiske valuta, som gjeldstyngede land som Hellas og Sudan ofte gjøre. Den gjennomsnittlige Joe eller den gjennomsnittlige selskapet på gaten kan ikke holde instrumentet akkurat nå, enn si bruke det.

Men det er nettopp det den globale økonomiske eliten ønsker i ikke altfor fjern fremtid, og det vil bruke Kina som en Guinea gris. Før møtet i G20 sentralbanksjefer og finansministre i Chengdu, Kina, fra juli 22-23 noen forskere begynt å skyve ideen om en utvidet bruk av SDR (i dag verdt $1.39)

"Etablering av SDR som den ledende globale reservevaluta ville ha vidtrekkende fordeler" Jose Antonio Ocampo, professor ved Columbia University, skrev i et innlegg på Project Syndicate i juli 8.

"Beyond the push for å bruke SDR mer aktivt i IMF-programmer, regjeringer kunne utstede SDR obligasjoner. Dess, private banker kunne øke bruken av denne pengeenhet, akkurat som noen europeiske banker benyttet såkalte European Currency Unit, bidrar til å bane vei for euroen,"Han fortsetter.

IMF er på det som vel

på signalet, de IMF selv publiserte en artikkel på "hvorvidt en bredere rolle for SDR kunne bidra til [det internasjonale monetære systemet] ordnede. "

Det reflekterer Ocampo ideen om private selskaper som utsteder obligasjoner i SDR og banker gjør lån i SDR, eller en spesiell versjon av det som kalles M-SDR, antagelig står for "markedet" baserte instrumenter som obligasjoner.

IMF eksperimentert med disse M-SDR i 1970 og 1980 da bankene hadde SDR 5-7 milliarder i innskudd og hadde utstedt SDR 563 millioner i obligasjoner. En ussel beløp, men konseptet arbeidet i praksis.

"M-SDR dukket opp på 1970-tallet og begynnelsen av 1980 før markedet falmet, men det har blitt fornyet interesse nylig,"Skriver IMF, selv om det er uklart om det foreligger virkelig interesse utenfor IMFs fantasi og noen statskontrollert virksomhet, som overnasjonale utviklingsorganisasjoner.

Historien om SDR bruk. (IMF)

Historien om SDR bruk. (IMF)

Hvis du umiddelbart motvirke denne bekymringen, etter G20-møtet juli 25, visedirektør for Folkets Bank of Kinas (PBOC) Internasjonalt kontor Zhou Juan sa en internasjonal utviklingsorganisasjon som Asiatiske Infrastruktur og Investment Bank (AIIB) kunne utstede SDR obligasjoner i Kina så sent som i august, henhold til kinesisk avis Caixin.

Zhu ekko både Ocampo og IMF, og sa at "SDR-denominerte obligasjoner bør være attraktivt for offisielle investorer på sin foreløpige stadiet, fordi de kan gi diversifiserte investeringsprodukter og redusere valuta- og renterisiko."

Kina har åpent kalt for SDR å erstatte US-. dollar som verdens reservevaluta. "Kina har vært en pådriver for SDR å bli mer utbredt i noen tid, som en måte å utfordre dominans av dollaren uten å trykke på renminbi som en direkte konkurrent,"Julian Evans-Pritchard, en Kina økonom ved Capital Economics i Singapore, Reuters.

IMF gjorde en analyse og konkluderte med finansielle instrumenter i SDR ville lavere volatilitet og risiko i forhold til å holde eiendeler i enkeltvalutaer og spare kostnader, like Zhu sa i tillegg. "M-SDR kunne, derfor, være attraktiv for investorer og utstedere ved å tilby en prepackaged diversifisering alternativ,"Fondet skriver.

En løsning for Kinas kapitalutgang?

Kina insider David Marsh, grunnleggeren av finans tenketank OMFIF (Offisiell monetære og finansielle institusjoner Forum) skrev på Marketwatch i slutten av april om en annen fordel lansere M-SDR i Kina, selv om han snakker om et bredere spekter av applikasjoner i stedet for utstedelse av utviklingen institusjon.

Beijing SDR kapitalmarkedet initiativet vil tillate innenlandske kinesiske investorer for å abonnere på innenlandske obligasjonslån med en betydelig valuta komponent, et middel til å hjelpe dempe kapitalutgang som har fått fremtredende i det siste 18 måneder som følge av progressiv kapital liberalisering.

Med andre ord: Hvis kinesiske investorer kan kjøpe obligasjoner eller andre gjeldsinstrumenter i SDR i Kina, de kunne omgå kapitalkontroll og holde en diversifisert portefølje av euro, dollar, yen, og pounds med en liten mengde av renminbi blandet i. Og de trenger ikke å gå ut av deres måte smugling gull tvers grensen til Hong Kong eller kjøpe opp Italiensk fotball klubber.

Kina tapte $676 milliarder i kapital i 2015 alene og utenlandske valutareserver er nærmer seg kritisk nivå av $2.7 billioner (nå $3.2 billioner), minimum IMF mener landet trenger for å kjøre økonomien.

Så det er trygt å si at IMF hadde det samme problemet i tankene når det skrev sin papir, som forfattere vi ikke vet. I midten av juli fremgår det:

I Kina, det kan være uutnyttet etterspørsel blant innenlandske investorer eksponering mot reserve
valutaer som kapitalkontroll er gradvis løftet. Fra dette perspektivet, M-SDR utstedt i onshore markedet potensielt kan redusere etterspørselen etter utenlandsk valuta og redusere kapitalutgang ved at innenlandske aktører å diversifisere sine valutarisiko.

Selvfølgelig, Kina, IMF, og globale akademikere vil finne en rekke problemer å gjennomføre sin plan, inkludert ingen markedet clearing mekanismen og likviditetsproblemer eller rett og slett mangel på etterspørsel etter et overflødig produkt som ingen vet eller forstår.

Overflødige fordi institusjoner fra sentralbanker til statlige investeringsfond allerede kjører sine egne diversifisert valutaporteføljer og ikke trenger IMF for å fortelle dem som vekten er hensiktsmessig for sine egne behov.

Det er ingen etterspørsel etter produktet fordi det har eksistert i mer enn 40 år og det har ikke blitt tatt i bruk av private aktører. De eneste som ringer for det er embetsmenn og akademikere og den eneste bilen for tidlig adopsjoner er kinesiske statsbanker eller statskontrollerte internasjonale institusjoner som ikke kan ta en beslutning på egen hånd.

Men praktiske problemer som dette har aldri avskrekket IMF eller Kina.

Følg Valentin på Twitter: @vxschmid

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En kvinne teller kinesiske yuan regninger verdt tusenvis av dollar i Vancouver, Canada, den okt. 27, 2015. (Benjamin Chasteen / Epoch Times)En kvinne teller kinesiske yuan regninger verdt tusenvis av dollar i Vancouver, Canada, den okt. 27, 2015. (Benjamin Chasteen / Epoch Times)

Sjeføkonom i Citigroup er ikke din gjennomsnittlige økonom. Ja, Willem Buiter studert nok av økonomisk teori ved Yale og Cambridge, men da han sier morsomme ting som New York State Driving Test var hans "største skoleprestasjoner."

Han er også svært frittalende for noen som jobber for en av de største bankene i verden. Han mener Citigroup "må ha bestemt seg for at det var bedre å ha noen som forteller sannheten noen ganger enn å ha noen som forteller hva folk ønsker å høre."

Epoch Times snakket med Mr. Buiter om en mulig finanskrise i Kina, en devaluering av valutaen og mulige løsninger. [Hopp til 19:00 i video]

De kommer til å ha en finansiell krise.

- Willem Buiter, Citigroup

Epoch Times: Hva er Kinas problemer?

Willem Buiter: Kina har tre problemer. Den har en vanvittig over-leveraged næringslivet, banksektoren, og skygge banksektoren som virkelig trenger restrukturering og konsolidering. Det har massiv overkapasitet i mange av de viktige næringene, så det har en syklisk problem.

Og da er det må balansere: Fra eksportvekst til innenlandsk etterspørsel som går fra investeringsveksten til forbruk; fra fysisk varer vekst til tjenester; fra Jeg kan ikke puste til grønt; og en økende rolle for privat sektor. Dette rett og slett ikke skjer i øyeblikket.

Citigroup Sjeføkonom Willem Buiter i et intervju med Epoch Times i New York juli 6, 2016. (Epoch Times)

Citigroup Sjeføkonom Willem Buiter i et intervju med Epoch Times i New York juli 6, 2016. (Epoch Times)

Veksten har sluttet å falle i øyeblikket, skjønt det er betydelig lavere enn hva det var, men bare av uholdbare stimuleringstiltak.

Dette er kredittveksten som legger til overdreven innflytelse. Investering i sektorer hvor det allerede er overkapasitet, utgangspunktet å bygge opp en større og hardere landing ved å utsette de nødvendige justeringene.

Revideringen av segmentene har blitt satt på vent fordi dette krever aktiv og nyskapende politikk. Med anti-korrupsjonskampanje fortsatt i full sving, i sitt fjerde år nå, og hvis noe intensiverer, alle embetsmenn i departementet eller partiet er villig til å stikke nakken ut og gjøre noe uprøvd og ny. Ting som er nødvendig både når det gjelder finansiell stabilitet administrasjon, i form av stabiliseringspolitikken, rett type finanspolitisk stimulans og i form av rebalansering.

Epoch Times: Hva kan bli gjort?

MR. Buiter: Vi trenger å øke rolle privat sektor for å kutte ned på statsforetak. Hva skjer? Vi vokser statseide bedrifter fordi det er den minste motstands vei fordi vi vet hvordan du gjør det.

Så da Kina er i et holdingselskap mønster, og jeg tror det vil ikke endres før det er en lang kjøre rebalansering, inntil de politiske sakene som er reflektert i anti-korrupsjonskampanje er avgjort, det vil ikke bli støttet av de riktige finanspolitikk.

Med mindre de er villige til å gå for kinesisk helikopter penger, stimulans rettet hovedsakelig mot forbruk ikke på investeringer. Ja, noen investeringer som sosial boligbygging, rimelig bolig, ja, enda noen infrastruktur.

Men organisasjon som støtter infrastruktur, ikke høyhastighetstog i Tibet. Det må bli finansiert av staten, det eneste foretaket med dype lommer og det må være innbringende av People Bank of China.

Det er det landet trenger og i øyeblikket er det ikke i stand til politisk ikke teknisk for å nå den slags oppløsning. Jeg tror det er lite sannsynlig at de vil være i stand til å oppnå det uten minst en nedgangskonjunktur av noen alvorlighetsgrad. Hvor dypt avhengig av hvor raskt de reagerer når ting begynner synlig går pære formet.

Arbeidere går om sine oppgaver på en byggeplass for nye butikker i Beijing på november 28, 2011.  (Goh Chai Hin / AFP / Getty Images)

Arbeidere går om sine oppgaver på en byggeplass for nye butikker i Beijing på november 28, 2011. (Goh Chai Hin / AFP / Getty Images)

Epoch Times: Hva er ditt estimat for kinesisk BNP-vekst i dette øyeblikk?

MR. Buiter: et eller annet sted under 4 prosent. Det offisielle tallet er fortsatt rundt 7 prosent, men disse data er tatt opp i den statistiske kjøkkenet.

Epoch Times: Så hvis veksten er 4 prosent og renten er 8 prosent, ikke dette skape problemer?

MR. Buiter: Realrentene er høy i Kina. Spesielt for det jeg kaller ærlig, private låntakere. Forholdet mellom renten til veksten driver gjeld til BNP dynamikk. Den såkalte snøballeffekten er negativ når renten overstiger veksten og det er trolig tilfelle nå.

Så det er et problem der. De er løsbar. Det er ingenting utover ken av mannen. Hjulet trenger ikke å bli gjenoppfunnet men å ha verktøy og være politisk stand til å bruke dem, og villige til å bruke dem er forskjellige ting. Kina har verktøyene, men ikke ennå vilje og evne til å bruke dem på den måten som er nødvendig for å unngå en hard landing.

Finanskrise

Epoch Times: Så vi snakker om en noe lignende problem enn i Europa. Vi måtte skrive ned mye om dårlig gjeld. Vi rekapitalisering av bankene og deretter stimulere forbrukeren til å få inflasjonen?

MR. Buiter: I Europa selvfølgelig, Vi burde egentlig finansiere kapitalutgifter. Investeringstakt er notorisk lav i Europa. Kina har det motsatte problemet. De trenger å øke forbruket. Så det er en åpenbar vinn-vinn-situasjon at vi kunne ha.

gjeldssanering, hårklipp om nødvendig og deretter et godt målrettet stimulans finansiert slutt gjennom den europeiske sentralbanken (ECB), folks helikopter penger. Kina vil bli sikte på forbruk. Sammensetningen er annerledes fordi Kina investerer for mye.

Du kan ha en god gammel finanskrisen uten å ha 1997-1998 Asian utenlandsgjeld saken, som Kina ikke har.

- Willem Buiter, Citigroup

Epoch Times: Hva om Kina ikke løse problemet?

MR. Buiter: De kommer til å ha en finansiell krise. Det kan håndteres på grunn 95 prosent av den dårlige gjelden er yuan-denominert, men du må være villig til å gjøre det, du må være proaktiv.

USA hadde ikke en utenlandsk valuta denominert gjeld problem da det hadde den store finanskrisen. Bankene falt over. Disse var alle dollar denominert gjeld. Du kan ha en god gammel finanskrisen uten å ha 1997-1998 Asian utenlandsgjeld saken, som Kina ikke har.

Så en finanskrise er en risiko. Deretter, selvfølgelig, en kraftig svekkelse av yuan som ville bli konsekvensen hvis reservene måtte bli brukt til å ivareta systematisk viktige enheter som har valutagjeld. Dette ville være konsekvensen av en unnlatelse av å handle, en lavkonjunktur og, i verste fall, en finansiell krise. En gang til, noe som er overlevings; ikke slutten av verden, men svært kostbare og politisk destabiliserende.

Det offisielle tallet er fortsatt rundt 7 prosent, men disse data er tatt opp i den statistiske kjøkkenet.

- Willem Buiter, Citigroup

Devaluering

Epoch Times: Men valuta måtte gå ned.

MR. Buiter: Jeg kan ikke se yuan følgende dollar over det neste året, enn si to år, Nei. Jeg tror at i øyeblikket, markedet er ikke lenger redd for en eminent kraftig svekkelse. Så kapitalutgang drevet av forventninger om en kraftig svekkelse har opphørt. Men de kunne være tilbake sånn, særlig hvis det er flere kerfuffles i Europa, en annen blusse opp. Kanskje bankkrisen, og som et resultat ytterligere press oppover på dollaren og andre safe-haven valutaer.

Og den kinesiske valutaen blir dradd? Jeg tror ikke det. De blir nødt til å frakoble. Så det er en kanal som for eksterne grunner, yuan pinne kan bli vanskelig å administrere.

Epoch Times: Hvordan ser du resten av året?

MR. Buiter: Fortsatt dempet vekst. Kina flørter med tap av tro på sin evne til å styre sin valuta og flørter med en kraftig oppbremsing i aktivitet. Europa og resten av den industrielle verden, forutsatt at de Brexit forhandlingene forblir ryddig, ikke altfor fiendtlig og vokser saktere enn den gjorde i fjor, men ikke dramatisk saktere.

Hvis Brexit blir et bikkjeslagsmål mellom 27 og U.K. Hvis Brexit blir smittsom, gjennom stortingsvalg i Nederland i mars neste år, i Frankrike, Tyskland. Hvis den italienske folkeavstemning i oktober eller november i år går mot regjeringen og frykt for emulering av den britiske eksempel tar over, så det kan være en ytterligere, dypere nedgang i aktivitet.

USA igjen skal putter rundt omtrent på samme måte som i fjor. Så middelmådige vekst i beste fall med hovedsakelig nedsiderisiko. Noen fremvoksende markeder-Russland, Brasil-vil gjøre det bedre i år enn de gjorde i fjor rett og slett fordi det er umulig å gjøre verre.

Hjulet trenger ikke å bli gjenoppfunnet men å ha verktøy og være politisk stand til å bruke dem, og villige til å bruke dem er forskjellige ting.

- Willem Buiter, Citigroup

De spesifikke sjokk, hjemmelaget hovedsakelig i Brasil, delvis eksterne som oljepriser i Russland og sanksjoner. Disse tingene er ikke lenger å bremse dem i samme grad. Så noen utvinning er mulig.

Det kommer til å være en sekulær stagnasjon verden, med mindre vi gir den kombinerte penge stimulans og lengre sikt, tilbudssiden, fremmende tiltak for å fremme vekst, høyere investeringer, bedre utdanning og opplæring inkludert yrkesopplæring, fornuftig deregulering, mindre disincentivizing beskatning og alt det der.

Alle disse tingene er nødvendig for å holde produksjonspotensialet på et nivå som gjør det mulig å oppfylle våre ambisjoner, men selv det elendig nivå av veksten i produksjonspotensialet vil ikke bli oppnådd med mindre vi har ekstra stimulans.

Epoch Times: Så ingen måte for aksjer å gå opp en annen ti prosent herfra?

MR. Buiter: Alt er mulig, men jeg tror det grunnleggende å si nei.

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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 av RealVisionTV in an 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. Som et resultat, 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 prosent av BNP, 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,"Sier Bass. 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.

Kilde: McKinsey

Kilde: McKinsey

Ifølge Bloomberg, Chinese companies raised 1.85 trillion yuan ($280 milliarder) 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, opp 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,"Sier Bass, 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," han sier.

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," han sa.

Devaluering

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 dårlige lån could lead to losses of up to $3 trillion or 30 prosent av BNP. 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. “In China, the credit excesses are already built in,"Sier Bass.

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. "Den kinesiske regjeringen ønsker en devaluering, 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, derimot, 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, derimot, 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, i mars 9, 2010. (Bilder STR / AFP / Getty)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, i mars 9, 2010. (Bilder STR / AFP / Getty)

One thing is for sure, de Chinese yuan just had its worst drop on record ever since the last currency in 1994. Den yuan tapt 2.9 percent against the dollar since the end of March to 6.64 juni 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 kapitalutgang, which ebbed off to $20-$30 billion per month after $100+ billion run-rates in the first two months of the year. De 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. Før, 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.

På den andre siden, 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 per 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, den okt. 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, den okt. 28, 2013.  (Alex Ogle/AFP/Getty Images)

På overflaten, 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, like 4.8 percent year over year in April. Også, total imports including Hong Kong were down 10.3 prosent i løpet av året.

“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.”

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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).
“The $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)
Med andre ord, 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. In total, cross-border banking liquidity decreased by $651 milliarder til $26.4 billioner.
These $26 trillion in cross-border claims could be anything related from trade finance to derivative contracts which cross two banking jurisdiction. For eksempel, 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 milliarder, eller 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 billioner (nå $3.2 billioner).
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.
De $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.
(Capital Economics)
Global Contagion
The BIS report also details how closely Chinese banks are tied into the global financial system.
kinesiske banker, after paying back much of their international liabilities in 2015 are still lending $529 billion 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. Furthermore, 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.

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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 (ned $28 milliarder til $3,192 billioner).
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.
derimot, 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.
(Capital Economics)
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, according to the 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, though.
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.”


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Chinese traders love speculating in anything that’s not bolted down. So they effectively took over the virtual currency Bitcoin, representing 90 percent of global trading volumes. And if trading the volatile Bitcoin cryptocurrency wasn’t enough, BitMEX offers them the opportunity to use leverage as well.
“Our goal is to let anyone bet on anything at any time,” BitMEX founder Arthur Hayes told Bloomberg. The 30-year old ex-Citigroup trader founded BitMEX in Hong Kong two years ago, modeling it after the Chicago Mercantile Exchange (CME). The CME allows traders to buy or sell vast quantities of commodities or financial instruments putting little money down.
This process is called speculating on margin, a process BitMEX has taken to the cryptocurrency world. Traders have to deposit Bitcoin (or other cryptocurrencies) instead of dollars or euros or yuan to fund their accounts.
They can then use one Bitcoin to buy a contract worth 100 Bitcoin—100 times is the exchange’s maximum leverage—and BitMEX charges a fee of 0.005 percent for each transaction.
Similar to the real futures exchange in Chicago and elsewhere, all the traders are doing is entering a legal contract, which is settled in cash (or cryptocash in this case) after it expires or the trader is stopped out. Real bitcoins, altcoins, ether, or daos—all cryptocurrencies—don’t change hand.
In the example above, a trader could buy a contract worth 100 bitcoin for only one bitcoin. If the price goes up 5 percent the trader makes 5 bitcoin or a 500 percent return on his original 1 bitcoin investment. derimot, if the price falls 1 prosent, he loses 100 percent or all of his initial investment. There is no chance to buy and hold, or wait until the price recovers.
This is similar to regular spread-betting exchanges like Alpari or the bucket shops of the roaring 20s.
A preview of the BitMEX trading dashboard (BitMEX)
The exchange’s algorithms and computer programs make sure winners and losers always net out to zero, again similar to the real futures exchange. derimot, unlike the role-model, winners may be asked to subsidize losers at times.
“BitMEX contracts have high leverage. In very rare cases, profits may be reduced during certain time periods if there is not enough money on the exchange to cover user profits,” it states on the company’s website.
The company wants to expand its offering beyond cryptocurrencies so Chinese speculators can bet on Western financial indices and stocks and Westerners interested in Chinese stocks can bet on mainland financial markets.
While China has regulated inbound and outbound money transfers and investments, bitcoin can flow freely, making it possible for mainlanders and Westerners to found their account and start betting.
Because they aren’t really buying or selling anything and merely entering into contracts, BitMEX doesn’t need to worry about moving around the underlying financial products.
Så langt, the company is far away from its goal to have “anyone bet on anything,” however. Chinese can only bet on U.S. dollar interest rates (one contract) and Westerners can only bet on the FTSE China A50 share index (one contract.)

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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 til $105.
derimot, this love has been rekindled as the virtual currency quietly rose from $200 i august 2015 til $525 nå.
“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.
For eksempel: The price of one bitcoin in yuan on June 1 was 3608. This is equivalent to $548. But the dollar price of Bitcoin was only $525, en 4.4 percent premium.
I tillegg, even if the objective is to get rid of yuan, there are violent price moves even in U.S. dollar, 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 milliarder) is tiny compared to the Chinese banking system ($35 billioner) and even compared to the total amount of capital that left China in 2015 ($676 milliarder).
We cannot ignore the revolutionary changes it brought to the financial sector. , Cyberspace Administration of China

derimot, 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 (rundt $22.5 billion during the last 30 days).
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 [was] 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.”
(Wall Street Journal)

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

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Nylig, 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 tons), 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 prosent til 13.5 tons in the first quarter compared to the end of 2015.
Globally, gold ETFs increased their holdings by 364 tons, 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 tons, opp 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,"Rapporten slår fast.
(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 tons.
“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 prosent i løpet av året (216 tons to 179 tons).
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,"Heter det i rapporten. China added 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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May 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.”
Faktisk, OSS. 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, derimot, 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. BNP, a key input for the Fed in its rate decision, being upgraded from 2.5 prosent til 2.9 prosent, the rate hike is becoming ever more likely.
(Atlanta Fed)
This dynamic, selvfølgelig, isn’t new. Ever since the Fed stopped it’s Quantitative Easing (QE) program in December of 2013, den US-. dollar hit rock bottom against the yuan and has appreciated 8 prosent. 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, derimot, 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. Dess, 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, the 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 per 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.
On May 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, den US-. dollar has steadily crept higher, conversely pulling the yuan lower. Siden 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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På overflaten, 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. Now, the sentiment is more negative, despite another ramp up in debt and investment to stabilize the economy in early 2016.
(Macquarie)
Investment bank Macquarie, derimot, 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 crisis, is that nominal growth will grow enough to reduce the debt to GDP ratio to a manageable proportion. derimot, 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 År siden: 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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