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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (129878)	2/6/2017 3:06:01 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 217571

There is no market for Yuan denominated debt outside of Hong Kong and China. When China has sold debt in the global debt markets they have needed to denominate their debt in China has needed to borrow in Euros or US Dollars, which is a risky proposition which could easily lead to a currency collapse in China - so China has kept these forays into the international market very small.

To: RetiredNow who wrote (129878)	2/6/2017 6:13:43 PM
From: TobagoJack	Read Replies (2) \| Respond to of 217571

3 trillion left but china forex reserves shall likely go down by 90%, leaving 300 billion as working capital, over the next few years, because the need for us dollars reserved is past its best-use-by date after all, how much rmb does the usa have in reserve? precisely zero in the mean time, from suspect msm bloomberg.com China's Factories Don't Fear Trump Feb 6, 2017 2:00 AM EST President Donald Trump seems determined to start a fight with China over trade. He's appointed notable China skeptics to his economic team, badgered companies like Apple Inc. to stop making products on the mainland, and threatened tariffs of 45 percent on Chinese goods. He hopes to get companies to move their manufacturing operations back home and create jobs in American factories. It won't work. In fact, it's likely to hurt the very voters he's promised to protect. China's factories now compete less on cheap labor and more on advanced technology. China has top-notch infrastructure, a skilled workforce, and factories that thrive on process innovation -- the ability to rethink how products are assembled to maximize efficiency and flexibility. They're embedded in the vast supply chain known as Factory Asia, which means they can smoothly synthesize components and raw material from around the world and quickly respond to the fickle tastes of global consumers. Increasingly, they're moving from assembly work to higher-value pursuits, such as engineering, design and branding. Outbound direct investment surged by 44 percent last year as Chinese firms acquired technology companies overseas. Investment in automation has soared: China is now the world's biggest market for industrial robots, with sales growing by about 20 percent a year. Automation Inclination China's demand for industrial robots is rising quickly Source: International Federation of Robotics *Estimated By and large, U.S. manufacturers haven't responded to this competition by becoming more innovative in their own right. One recent study found that, faced with rising Chinese imports, they've cut spending on research and development and filed far fewer patents. A bigger problem, as Apple's Tim Cook recently noted, is that the U.S. labor force lacks the skills required for large-scale advanced manufacturing. Conceivably, many Chinese factories could outcompete their American peers even with Trump's tariffs in place. What production does return to American shores -- as a result of tariffs, blandishments or threats -- is more likely to be done by robots than by Trump voters, as automation continues its relentless advance. If the benefits of these policies are illusory, however, the drawbacks will be real. For a start, prices will rise and living standards will fall. By one estimate, the cost of making an iPhone would increase by $30 to $40 if Apple were made to assemble its devices in the U.S., and by $100 if it also tried to make the components domestically. When the Barack Obama administration placed a 35 percent tariff on Chinese tires in 2009, the result was $1.1 billion in added costs to consumers. The burden of such price increases falls most heavily on the poor, who have benefited hugely from cheap Chinese-made goods. Another consequence is that these policies are likely to invite retaliation. China has already suggested it might step up tax and antitrust scrutiny of U.S. businesses, initiate anti-dumping investigations, or reduce government purchases of American goods. It could easily erect more tariffs of its own, on everything from airplanes to agriculture. U.S. companies doing business there are rightly concerned. A better way to level the playing field is to push China to open more of its markets to U.S. products and to protect intellectual property. A better way to boost American competitiveness is to invest in upgrading the workforce for the age of automation. A larger lesson is that global trade isn't a zero-sum affair -- and that harming China's economy, far from helping Americans, will only make everyone worse off. To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.

To: RetiredNow who wrote (129878)	2/7/2017 10:40:44 AM
From: elmatador	Respond to of 217571

China forex reserves dip under $3tn to touch 5-year low Pace of decline slowest in 7 months as renminbi strengthens and capital controls bite 5 HOURS AGO by: Gabriel Wildau in Shanghai China’s foreign exchange reserves dipped below $3tn in January for the first time in five years but the decline was the lowest in seven months as tighter capital controlsand a stronger renminbi discouraged outflows. Official reserves fell by $12.3bn to just under $3tn, well below the average $52bn monthly drop in the third quarter of last year. China’s reserves peaked at $3.99tn in June 2014 but since then the central bank has sold dollars aggressively to curb renminbi depreciation. But a stronger renminbi in January weakened investor impetus to buy foreign currency, reducing the need for intervention. The renminbi recovered by 1 per cent in January, in line with a broader downward correction in the dollar following the US currency’s surge after Donald Trump’s election as president and the Federal Reserve’s interest rate rise in December. The renminbi weakened by 6.5 per cent versus the dollar in 2016, its biggest annual decline on record. Zhang Yu, head of international research at Minsheng Securities in Beijing, warned that the currency’s January gains may be shortlived. “The renminbi was on an appreciation path in January, which was supportive for capital inflows,” she said. “But it’s premature to look at these numbers and conclude that overall expectations about renminbi depreciation have turned.” Analysts expect the renminbi to hit 7.18 per dollar in a year from its current level of 6.87, according to a Reuters poll of 50 analysts released on Tuesday. Chinese households expect the rate to hit 7.35, according to a survey by FT Confidential. Both would be a 10-year low. Rising Chinese interest rates have also increased the appeal of keeping money in the country. The People’s Bank of China has guided money-market rates higher in recent weeks by raising rates on loans to commercial banks through market operations and other monetary policy tools. PBoC tightening helped blunt the impact of expectations for further Fed rate rises, which had created substantial outflow pressure over the past two years — a period when Chinese rates were falling. Withdrawal of cross-border bank loans and deposits from China have been a larger contributor to overall capital outflows since 2015 than the much-publicised outbound acquisition spree. China’s central bank and foreign exchange regulator have imposed new restrictions in recent months as they seek to staunch the flow of cash moving offshore. The measures include tighter approvals for foreign acquisitions, stricter rules on forex purchases by individuals and limits on cross-border renminbi remittance, which enables investors to buy foreign currency in the unregulated offshore market. The State Administration of Foreign Exchange said late last month that it would strengthen monitoring of cross-border fund flows and ensure compliance with existing rules. “Real and legitimate cross-border payments and remittances will not be affected,” it added. The Financial Times reported last month that tighter forex controls had also begun to affect trade flows by restricting certain forms of import financing. The following day, Safe issued a statement denying unspecified media reports that it was cracking down on import financing. Analysts mostly played down the importance of China’s reserves breaching the $3tn barrier, which media had speculated was a key threshold for the PBoC. “We don’t think $3tn is some sort of bottom line for China’s forex reserves,” said Yan Ling, economist at China Merchants Securities. “People shouldn’t worry too much about it.” Additional reporting by Ma Nan Twitter: @gabewildau

To: RetiredNow who wrote (129878)	2/13/2017 6:23:04 PM
From: TobagoJack	1 Recommendation Recommended By John Pitera Read Replies (4) \| Respond to of 217571

http://blogs.cfr.org/setser/2017/02/13/the-dangerous-myth-that-china-needs-2-7-trillion-in-reserves/ The Dangerous Myth That China “Needs” $2.7 Trillion in Reserves Share $2.7 trillion is well over 3 times China’s short-term external debt (around $800 billion per the IMF). It is roughly two times China’s external debt ($1.4 trillion, counting over $200 billion in intra-company loans). It is enough to cover well over 12 months of goods and services imports (total imports in 2016 were around $2 trillion).* There are two good reasons why a country might need more reserves than it has maturing external debt. The first is that it has an ongoing current account deficit. A country arguably should hold reserves to survive one year without any external financing – the sum of the current account and short-term external debt. The other is that a country has lots of domestic foreign currency deposits. Neither applies to China. China’s runs a $200 to $300 billion current account surplus, so its one year external financing need is now around $500 billion. China has a relatively modest $250-$300 billion in foreign currency sight deposits, and just under $600 billion in domestic foreign currency deposits (to put that in context, it is about 5 percent of GDP). It would take just over a trillion in reserves to cover China’s external (short-term debt) and internal (domestic fx sight deposits) fx liquidity need. The $2.7 trillion number (or $2.6 trillion) stems from the initial application of the IMF’s new (and in my view flawed) reserve metric to China. The IMF’s metric revived M2 to reserves as an important indicator of reserve adequacy, and China is off the charts on this indicator (China has very little external debt, but a very large domestic deposit base – so a composite indicator that includes the domestic deposit base gets a very different result than metrics that focus on external debt). In the composite indicator, emerging economies with a fixed exchange rate and an open capital account need to hold 10% of M2 in reserves. That alone is about over 20% of China’s GDP – as China’s M2 to GDP ratio is a bit over 200%. For China, the weighted contributions from short-term debt, “exports” (the IMF uses exports rather than imports) and long-term external liabilities are trivial. For China, the entire reserve need more or less comes from one of the four variables in the IMF’s composite indicator ( more here). But that calculation is now outdated. The IMF has refined its metric to give more weight to the presence of capital controls, and China has tightened its controls. Assuming that there are capital controls, the IMF metric indicates that China would be fine with $1.8 trillion in reserves (though that sum rises over the course of 2017, thanks to the ongoing growth in M2 as a share of GDP). I am not a fan of the even the updated new metric. I am not a big fan of composite metrics in general. And if you are going to use a composite metric, I think the composite metric should put more weight on foreign currency deposits than domestic currency deposits, while the IMF’s metric typically weights all domestic deposits at 5%. The IMF’s metric thus ignores one of the key insights of balance sheet analysis. No matter. The world would be in a better place if there was a broad recognition that China can burn through another $1 trillion in reserves and, with $2 trillion still in reserves, be above every nearly all metrics of reserve adequacy. This isn’t to downplay the scale of China’s reserve loss. The BoP data shows a reserve outflow of a bit more than $440 billion in 2016. That is significant. But I suspect that much of the outflow that led to the fall actually was the state actors. The build up of foreign assets in the banks, loans from the state banks to the world and easily controllable portfolio outflows from large institutions likely accounted for about $250 billion of the total fall in reserves. This leaves the true fall in the total foreign assets of China’s state sector at more like $200 billion. Still big, but not quite as big. Set that debate aside though. The reason for concern about China is the rapid pace of the reserve decline, not the risk that China is about to run out of reserves. China might conclude it doesn’t want to continue to finance outflows with reserves, in which case its currency would depreciate until the trade surplus was large enough to finance the outflow. One final point. The IMF’s initial metric implied China needed far more reserves, relative to its GDP, than other emerging markets economies – more than Brazil, more than Turkey, more than Russia, more than Ukraine (see this post, or play with the IMF’s data tool). That never made sense to me, even though China does have a more managed exchange rate than most. Domestic capital flight can force a country off a peg, no doubt – but the negative macroeconomic impact of a depreciation is proportionate to the amount of foreign currency debt in the economy, not the size of the domestic deposit base. The IMF metric uses exports rather than the traditional imports, but China is just fine using exports too. China’s export to GDP ratio has come down after the global financial crisis. In the absence of capital controls, the IMF’s latest reserve metric spreadsheet suggests China now needs more than $2.7 trillion using the 10% of M2 weighting, incidentally. The estimated 2017 reserve need is — gulp — $3.3 trillion. One way of interpreting that is that China lacks the reserves to open its financial account if it wants to continue to manage its exchange rate. Another way of interpreting it is that the metric doesn’t really work for an M2 to GDP outlier like China. * The IMF’s reserve data interface is now quite useful. And all the underlying data is available in a convenient spreadsheet. That makes it easy to check out the contribution of various components. I would be thrilled if the IMF added the foreign currency/ domestic currency split of M2 so that those of us who are interested in the foreign currency deposit base would have a new resource for cross country comparison.