The Financial Collapse of 2001 Unwinding Message Board

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Strategies & Market Trends : The Financial Collapse of 2001 Unwinding

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From: Snowshoe	1/7/2019 11:06:39 AM
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WTF? China borrowed USD to fund Belt and Road? Who in their right mind provided this funding? Banks? Hedge funds? The Saudis? China invented paper money, so I'm utterly astounded... China Has a Dangerous Dollar Debt Addiction With $1.2 trillion needing to be rolled over this year, the threat of a funding crunch is rising. bloomberg.com Beijing’s policies have exacerbated the buildup of foreign debt. To promote Xi Jinping’s Belt and Road Initiative, the president’s landmark foreign policy endeavor, China has been borrowing dollars on international markets and lending around the world for everything from Kenyan railways to Pakistani business parks. With this year and 2020 being the peak years for repayments, China faces dollar funding pressure. To repay their dollar debts, Chinese firms will either have to draw from the central bank’s foreign-exchange reserves (a prospect Beijing is unlikely to allow) or buy dollars on international markets. This creates a new set of problems. There are only 617 billion yuan ($90 billion) of offshore renminbi deposits in Hong Kong available to buy dollars. If China was to push firms to bring debt back onshore, this would necessitate significant outflows that would push down the yuan’s value against the dollar. International dollar investors need to be wary of Chinese-linked investments. Local government financing vehicles and belt-and-road borrowers may seem quasi-sovereign quality, but any shift in the willingness to roll over dollar debt could create a funding crunch. With the U.S. Federal Reserve raising rates and reducing its balance sheet, Chinese companies could face paying more for capital in dollars than in yuan.

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