1/10
Demand for USD bonds issued by the Chinese government was very strong, and Lexington sees this as evidence that investors are ignoring or discounting domestic financial turmoil in China's property markets.
ft.com/content/677723…
Demand for USD bonds issued by the Chinese government was very strong, and Lexington sees this as evidence that investors are ignoring or discounting domestic financial turmoil in China's property markets.
ft.com/content/677723…
2/10
I don't think this is the right way to look at it. It makes more sense to argue that the nature of China’s domestic problems are more likely to result in the near term in greater inflows, and so China's domestic problems in fact strengthen China's external position.
I don't think this is the right way to look at it. It makes more sense to argue that the nature of China’s domestic problems are more likely to result in the near term in greater inflows, and so China's domestic problems in fact strengthen China's external position.
3/10
This may seem surprising at first, but it is why for the past two years even as debt problems have deteriorated I have nonetheless been telling my clients not just to buy USD bonds issued by the Chinese government but, even better, to buy RMB bonds. The currency...
This may seem surprising at first, but it is why for the past two years even as debt problems have deteriorated I have nonetheless been telling my clients not just to buy USD bonds issued by the Chinese government but, even better, to buy RMB bonds. The currency...
4/10
is only likely to strengthen. This is because as investment, especially in the property sector, declines, and as consumption growth fails to keep pace, to balance the two almost by definition requires either that Chinese unemployment soar or China’s trade surplus grow.
is only likely to strengthen. This is because as investment, especially in the property sector, declines, and as consumption growth fails to keep pace, to balance the two almost by definition requires either that Chinese unemployment soar or China’s trade surplus grow.
5/10
As long as Beijing has debt capacity, and it still has plenty of debt capacity, it is unlikely to be the former, and so – although this seems to have come as a surprise to most analysts – Chinese exports and its trade surplus have soared.
As long as Beijing has debt capacity, and it still has plenty of debt capacity, it is unlikely to be the former, and so – although this seems to have come as a surprise to most analysts – Chinese exports and its trade surplus have soared.
6/10
This put upward pressure on the RMB, which in turn encouraged financial inflows into Chinese government bonds. That's why in spite of a bit of volatility in early 2020, the CFETS RMB index has risen almost in a straight line from 91.06 two years ago to 99.93, for...
This put upward pressure on the RMB, which in turn encouraged financial inflows into Chinese government bonds. That's why in spite of a bit of volatility in early 2020, the CFETS RMB index has risen almost in a straight line from 91.06 two years ago to 99.93, for...
7/10
a 2-year rise of 9.7%, The combination of trade surpluses and financial inflows together have resulted in nearly a trillion dollars of net inflows (although since 2017 these show up in the external position of state-controlled banks rather than in formal reserves).
a 2-year rise of 9.7%, The combination of trade surpluses and financial inflows together have resulted in nearly a trillion dollars of net inflows (although since 2017 these show up in the external position of state-controlled banks rather than in formal reserves).
8/10
By the way Lexington repeats a claim made by China's NFID and by Bloomberg that “total debt as a percentage of China’s gross domestic product is declining”. This claim however, as I've argued before, is based on a quirk in the way the debt-to-GDP ratio is calculated.
By the way Lexington repeats a claim made by China's NFID and by Bloomberg that “total debt as a percentage of China’s gross domestic product is declining”. This claim however, as I've argued before, is based on a quirk in the way the debt-to-GDP ratio is calculated.
9/10
After a huge, COVID-related jump in Q1 2019, debt dropped sharply relative to GDP in the next three quarters. This decline is captured in the debt-to-GDP data for first three quarters of 2021 if you use a trailing 4-quarter measurement, as NFID does.
After a huge, COVID-related jump in Q1 2019, debt dropped sharply relative to GDP in the next three quarters. This decline is captured in the debt-to-GDP data for first three quarters of 2021 if you use a trailing 4-quarter measurement, as NFID does.
10/10
If however you just use quarterly data, it becomes obvious that in every quarter of this year debt rose faster than GDP. We will see this when we get the final annual debt-to-GDP numbers.
If however you just use quarterly data, it becomes obvious that in every quarter of this year debt rose faster than GDP. We will see this when we get the final annual debt-to-GDP numbers.
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