China Estimates Largest Capital Outflow in More Than a Decade in 2014

http://www.wsj.com/articles/china-estimates-largest-capital-outflow-in-more-than-a-decade-in-final-quarter-2014-1422964754

by fown9 • 11 years ago

40 36 11 years ago

wsj.com

randomname2• 11 years ago

"Mr. Tao informed the audience that the capital flight from China in December alone amounted to $20 billion, and that was just from official channels. The true amount could be four times greater."

So this bureaucrat just committed career suicide by admitting this.

differentView• 11 years ago

Where did you read that? Are you responding to a different article?

dualogy• 11 years ago

Not really, think again.

China needs to convert their $4T into "real value" sooner or later. Rather sooner. Various official statements over the last year indicated as much: "after decades of accumulating dollars and treasuries, we have concluded that it would be wiser to reverse course and start spending them".

This presents them with two problems, the danger of being accused of dumping dollars (aka of agressive currency warfare), and the risk that doing so too much, too fast could crash the value of their remaining holdings when "financial markets" see what you're up to.

Much better to let your 1.3 billion people do the job: seemingly-inadvertently "encourage" capital flight and replace any too many "capital outflows" with your reserves. Your folks buy up assets all over the world and officials have the excuse of an emergency situation that justifies "using our reserves that were always meant for a rainy day just like this".

Just a wild little theory of mine. Take it or leave it ;D

thatsjustcrazy• 11 years ago

Interesting speculation. Anecdotally, I've heard that in some H1B situations where real estate is purchased, a % of the sale price is given back to the Chinese government.

sandworm4• 11 years ago

I know where it's going. My neighbourhood in Vancouver BC is covered in "for sale" signs. There are minivans full of Chinese investors paroling the sidestreets looking for houses.

The downside is that, by my count, more than half of the houses are vacant or under construction. I smell bubble.

hnnewguy• 11 years ago

I smell bubble.

Canada is one of the last-men-standing as far as housing bubbles. Toronto is also bad. Calgary is heading for trouble now that oil has crashed. It could get interesting.

jusben1369• 11 years ago

Australia and Canada are very similar. Both continued with a housing bubble well after all other Western markets collapsed. Both also supplied the raw materials that fuel China's economy; an economy that didn't slow down very much while the rest of the West suffered. But now they're clearly takings some of the heat out of their economy. Australia and Canada will feel that.

hindsightbias• 11 years ago

The Chinese could bleed $100B/yr into the west coast of North America for years and not blink.

That's cash, not derivatives, in those minivans. They're settling here, unless you think they're going to fall in love with Detroit or Wichita.

This is the new normal.

mc322• 11 years ago

This a problem in first tier cities even in the US. It's not only the IPO crowd driving up prices in SF, NYC, etc. But these foreign investors --the IPO people get the flack from displaced communities, but foreign investment contributes its own good share of this new housing shortage... It's begun to affect second tier cities like Minneapolis, Austin, etc.

mikecuesta• 11 years ago

Try living in a city like Miami where a staggering amount of condos/property are primarily treated as a store of value by foreigners.

mc322• 11 years ago

Sorry, but I agree, this is being felt by all first tier cities, like Miami, as well as second tier metros.

rrggrr• 11 years ago

So what? Of course China's capital outflows were huge in 2014 - so was its current account surplus. When China takes in huge amounts of foreign currency for its exports it must recycle those funds - which flow out of the country - particularly if it insists on intervening in the value of its currency (keeping it from increasing and therefore subsidizing exports). So, huge capital outflows for China doesn't necessarily mean a China-driven housing or asset bubble. It does mean the European Central Bank and Federal Reserve should have no problem continuing to sell paper.

eyeareque• 11 years ago

I wish HN would ban paywalled article links.

vonklaus• 11 years ago

I also think that would make sense. Paywalling is a legitimate business strategy amd I don't fault these companies for wanting to get paid for content creation. However, HN is an aggregator so many people can't view an article like this. If a paywall article is posted, it would be nice to have a link to a plain text version or alternate link. I think this would be a good compromise.

mikeash• 11 years ago

All you have to do is Google the title and click the link from there, and no paywall.

tzakrajs2• 11 years ago

Isn't your good compromise just US Copyright violation by another name?

__Joker• 11 years ago

Apart from investing in real estate abroad, last year, Chinese folks were buying huge amounts of bitcoins.

What is the reason, Chinese people trust their economy less than the western economy ?

frankchn• 11 years ago

Evading capital controls, perhaps? Since the Yuan is not fully convertible, you can get USD from Yuan by using Bitcoin as an intermediary.

Canada• 11 years ago

Chinese capital controls are easing. The country has a lot of cash and continues to have a lot of income from exports. They're buying nice stuff and taking luxury vacations. They're investing in foreign companies and property. They can afford to, so why not? Were they supposed to just sit on the funds forever?

quarterwave• 11 years ago

I am reading this book 'The Dollar Trap: How the US dollar tightened its grip on global finance' [1], where economist Eswar Prasad explains how money flows into the US from around the world even when troubles originate in U.S financial markets.

[1] http://thedollartrap.com/

China Estimates Largest Capital Outflow in More Than a Decade in 2014

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