1/6
No big surprise: foreign holdings of Chinese stocks and bonds continue to rise, with bond purchases now outpacing stock purchases.
ft.com/content/9f281d…
No big surprise: foreign holdings of Chinese stocks and bonds continue to rise, with bond purchases now outpacing stock purchases.
ft.com/content/9f281d…
2/6
I think this trade continues to make sense for at least another year, especially in the case of Chinese government bonds, in part because in the past two years, and probably for at least another year, it has been part of a virtuous circle.
I think this trade continues to make sense for at least another year, especially in the case of Chinese government bonds, in part because in the past two years, and probably for at least another year, it has been part of a virtuous circle.
3/6
The combination of financial inflows and trade inflows (with surging trade surpluses in recent months) means that the RMB is likely to continue appreciating, and an appreciating currency of course encourages more inflows, which in turn puts more upward pressure on the RMB.
The combination of financial inflows and trade inflows (with surging trade surpluses in recent months) means that the RMB is likely to continue appreciating, and an appreciating currency of course encourages more inflows, which in turn puts more upward pressure on the RMB.
4/6
Of course virtuous circles can easily become vicious circles, in which outflows lead to depreciation which in turn encourages further outflows, but it's worth noting that international investors own $1.1 trillion of liquid Chinese securities, against which the PBoC...
Of course virtuous circles can easily become vicious circles, in which outflows lead to depreciation which in turn encourages further outflows, but it's worth noting that international investors own $1.1 trillion of liquid Chinese securities, against which the PBoC...
5/6
has $3.2 trillion in reserves and another $1 trillion in "indirect" reserves. That means that even if a substantial fraction of foreign investors suddenly head out, this can quite easily be absorbed out of indirect reserves before the PBoC would need explicitly to intervene.
has $3.2 trillion in reserves and another $1 trillion in "indirect" reserves. That means that even if a substantial fraction of foreign investors suddenly head out, this can quite easily be absorbed out of indirect reserves before the PBoC would need explicitly to intervene.
6/6
Once foreign holdings of liquid securities approaches 50% of the available reserves, however, I'd start to become more cautious.
Once foreign holdings of liquid securities approaches 50% of the available reserves, however, I'd start to become more cautious.
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