Thread by @Brad_Setser

The dog that hasn't barked this week? China's currency

(obviously the fact that is it managed is important here, but I also tend to think China's BoP is - for now - still relatively healthy)

The current account will end 2018 in a small surplus. Exports are poised to slow this year, but imports should fall too - thanks in part to lower prices for oil and semiconductors

And, well, net FDI remains in surplus, thanks largely to effective controls on FDI outflows

Unlike some bank analysts, I though China's detailed q3 BoP showed ongoing strength more than anything else.

Reserve growth fell a bit (but not all that much given CNY move), but that was partially offset by more non-reserve outflows

$25b in official asset growth (counting the rise state bank lending in q3) suggests China retains a bit of a buffer if financial inflows slow (as seems likely)

over the four quarters through q3 I count about $200b in state outflows (counting outflows through the state banks)

Expect inflows to slow -- as bank flows already have. but that need not be disastrous given China's buffers. The recent inflow has largely gone in my view to building up official assets

errors (uncontrolled hot outflows) remain relatively large, but in 2018 they were running at a slower pace than in 15-16

(will be watching to see if this changes of course)

I have been watching China's BoP for a very long time. Which if nothing else give me confidence in making some complex adjustments.

The way I view it, China's basic balance (current account + net FDI) currently covers "hot" outflows. & Regulated inflows = state outflows

Risk of course is that this could change quickly if China's outlook deteriorates further, or if there is a re-escalation in trade tensions.

But also think China has rebuilt some buffers the over the last 2ys.

(not the usual take I know)

that's all

(am clearly front running a future blog post)