1/5
For years I have been arguing that as long as total foreign portfolio inflows were low, they wouldn’t matter much to Chinese financial stability, but as they rose they would become increasingly destabilizing. Although I still don’t think the total...
scmp.com/economy/china-…
2/5
amount of inflows have yet reached a danger point, they have risen so dramatically in the past year that I expect that within a year or two they might become problematic.
It seems that Beijing is starting to recognize the risks. As this very good SCMP article...
3/5
puts it, “The rapid strengthening of the yuan exchange rate in recent weeks has triggered a debate in China about whether Beijing’s recent moves to open up its domestic financial markets to more foreign investment might have resulted in an unwelcome wave of...
4/5
speculative ‘hot money’ inflows that could result in imported inflation and asset bubbles.”
While local markets are clearly suffering from excess liquidity, speculation, and asset price bubbles, I think it is a little premature to blame this on foreign...
5/5
inflows. Still, I think this debate about allowing unfettered foreign financial inflows is only going to intensify over the next year. Whatever the outcome, I think it will be hard for Beijing to pull back without undermining local credibility.
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