China estimate of the day

by on January 13, 2016 at 2:58 pm in Current Affairs, Data Source, Economics | Permalink

…it appears that there was roughly $750 billion of capital outflow in 2015

The Aaron Back WSJ story is here, or try through here.  And here is a Victor Shih paper (pdf) on the fragility of China’s reserves, from 2011 but still of relevance.  One key point is that high wealth inequality in China makes capital flight easier to accomplish.

By the way, here is a profound Andrew Batson post on why China is not specializing much in its exports.  That is the good news, the bad news is that Chinese leveraging does not seem to be slowing down at all.

1 Gochujang January 13, 2016 at 3:13 pm

Seems to me that China’s specialization is in the sort of small-shop tooling that supports non-specialized manufacture. There are whole sub-cultures about buying Chinese pick-and-place, CNC, or laser cutters.

2 Fyodor January 13, 2016 at 5:12 pm

That’s a very prescient paper from Shih – his work is consistently excellent.

The ability of China’s government to prevent a financial crisis is contingent upon, amongst other things, control of the capital account. The scale of capital outflow in the past 12 months implies that China’s current monetary settings are unsustainable. Unless capital outflows are suppressed, most likely through the attempted reassertion of capital controls, China will conform to the trilemma by losing control of its exchange rate. The magnitude of current capital outflows relative to remaining FX reserves suggests that this will all play out this year, maybe next at the latest.

3 So Much For Subtlety January 13, 2016 at 7:13 pm

$750 billion in a poor, if large, Third World country?

I assume much of this is from officials and towards non-extraditing jurisdictions. It makes me wonder what they know that we do not know.

4 Chip January 13, 2016 at 8:49 pm

Big country stutters, small country roars.

Bit OTT but this story on Israeli startups is full of juicy data. For example:

In 2015, some 360 Israeli startups attracted $3.6 billion in funding. The figures for the U.S., China and Europe were $60 billion, $36 billion and $12 billion.

“On a per capita basis, Israel is miles ahead of the rest with US$423 in investment cash per person, dwarfing America’s US$186.”

“69 Israeli startups were sold in 2015 for total payment of US$5.41 billion.”

5 Steve Sailer January 13, 2016 at 11:04 pm

American movie studios, comic book publishers, and golf courses seem to be cashing in on that $750 billion.

6 Steve Sailer January 13, 2016 at 11:05 pm

What other fun but not very profitable American assets would Chinese flight capital overpay for?

7 Steve Sailer January 13, 2016 at 11:07 pm

If you see a news story that Chris Hughes has sold The New Republic to a Chinese communist party official …

8 glasnost January 14, 2016 at 12:56 am

“High wealth inequality makes capital flight easier to accomplish”.

Or to put it another way, growing inequality leads to instability, volatility, bubbles, and collapse. Or to put it another way, the socialists are right.

9 Zoya January 30, 2016 at 6:41 am

China has obviously taken huge break right away in the start of the year; we need to be careful with road ahead. I think many people are seriously under pressure with making decision; I just like to keep things simple, as that’s the way to get success. I have got great help with OctaFX broker, as they have wonderful cTrader demo contest, it is weekly based with having 400 dollars prize, so that means I can practice with great intensity.

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