Comments on: Secrets of SAFE: A sharp slowdown in reserve growth and large “hot” outflows in q4…. http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/ Thu, 14 Oct 2010 13:09:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Tycoons of the Day : Forget America's Stimulus http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-125151 Tycoons of the Day : Forget America's Stimulus Tue, 10 Feb 2009 23:41:27 +0000 http://blogs.cfr.org/setser/?p=4468#comment-125151 [...] be taken preemptively before an economic retreat," Wen said. China can certainly afford to do more: It has $1.9 trillion in foreign reserves, mostly in U.S. dollar-denominated [...] [...] be taken preemptively before an economic retreat,” Wen said. China can certainly afford to do more: It has $1.9 trillion in foreign reserves, mostly in U.S. dollar-denominated [...]

]]> By: GloboTrends Community http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-123142 GloboTrends Community Sat, 24 Jan 2009 20:28:21 +0000 http://blogs.cfr.org/setser/?p=4468#comment-123142 [...] in one respect that dependence has changed, as the pace of China’s reserve growth has slowed dramatically. Right now, the US in some sense relies more on private Chinese savers and less on China’s [...] [...] in one respect that dependence has changed, as the pace of China’s reserve growth has slowed dramatically. Right now, the US in some sense relies more on private Chinese savers and less on China’s [...]

]]> By: Brad Setser: Follow the Money » Blog Archive » Is the US now more, or less, reliant on China’s government for financing right now? http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122991 Brad Setser: Follow the Money » Blog Archive » Is the US now more, or less, reliant on China’s government for financing right now? Fri, 23 Jan 2009 15:08:11 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122991 [...] in one respect that dependence has changed, as the pace of China’s reserve growth has slowed dramatically. Right now, the US in some sense relies more on private Chinese savers and less on China’s [...] [...] in one respect that dependence has changed, as the pace of China’s reserve growth has slowed dramatically. Right now, the US in some sense relies more on private Chinese savers and less on China’s [...]

]]> By: Jim Bao http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122925 Jim Bao Thu, 22 Jan 2009 22:30:25 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122925 Hi Brad, Given the strict capital control, severe hot money inflow and outflow are unlikely. I would agree with Nick Lardy's explanation, but perhaps more than recapitalizing Ag Bank, China has converted the balance of FX reserve decline in the Q to fund other domestic initiatives (there are plenty of those as outlined by the 4T RMB stimulus plan). If this is indeed the case, it will mark the beginning of a long trend that will generate significant macro investing opptys. Hi Brad,

Given the strict capital control, severe hot money inflow and outflow are unlikely. I would agree with Nick Lardy’s explanation, but perhaps more than recapitalizing Ag Bank, China has converted the balance of FX reserve decline in the Q to fund other domestic initiatives (there are plenty of those as outlined by the 4T RMB stimulus plan). If this is indeed the case, it will mark the beginning of a long trend that will generate significant macro investing opptys.

]]> By: Globalization in reverse? The China Price Hits Bottom « King Harvest http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122873 Globalization in reverse? The China Price Hits Bottom « King Harvest Thu, 22 Jan 2009 06:49:57 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122873 [...] Brad Setser: Follow the Money ▶ Comment /* 0) { jQuery('#comments').show('', change_location()); jQuery('#showcomments a .closed').css('display', 'none'); jQuery('#showcomments a .open').css('display', 'inline'); return true; } else { jQuery('#comments').hide(''); jQuery('#showcomments a .closed').css('display', 'inline'); jQuery('#showcomments a .open').css('display', 'none'); return false; } } jQuery('#showcomments a').click(function(){ if(jQuery('#comments').css('display') == 'none') { self.location.href = '#comments'; check_location(); } else { check_location('hide'); } }); function change_location() { self.location.href = '#comments'; } }); /* ]]> */ Click here to cancel reply. [...] [...] Brad Setser: Follow the Money ▶ Comment /* 0) { jQuery(‘#comments’).show(”, change_location()); jQuery(‘#showcomments a .closed’).css(‘display’, ‘none’); jQuery(‘#showcomments a .open’).css(‘display’, ‘inline’); return true; } else { jQuery(‘#comments’).hide(”); jQuery(‘#showcomments a .closed’).css(‘display’, ‘inline’); jQuery(‘#showcomments a .open’).css(‘display’, ‘none’); return false; } } jQuery(‘#showcomments a’).click(function(){ if(jQuery(‘#comments’).css(‘display’) == ‘none’) { self.location.href = ‘#comments’; check_location(); } else { check_location(‘hide’); } }); function change_location() { self.location.href = ‘#comments’; } }); /* ]]> */ Click here to cancel reply. [...]

]]> By: GloboTrends Community http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122568 GloboTrends Community Sun, 18 Jan 2009 17:09:53 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122568 [...] Since reserve growth is a function of both the current account balance and capital outflows, it is possible that the rise in capital outflows could overwhelm the rise in the current account surplus. That seems to be what happened in q4. [...] [...] Since reserve growth is a function of both the current account balance and capital outflows, it is possible that the rise in capital outflows could overwhelm the rise in the current account surplus. That seems to be what happened in q4. [...]

]]> By: Brad Setser: Follow the Money » Blog Archive » It is the time to worry about a fall in China’s demand for the world’s goods, not a fall in China’s demand for Treasuries http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122554 Brad Setser: Follow the Money » Blog Archive » It is the time to worry about a fall in China’s demand for the world’s goods, not a fall in China’s demand for Treasuries Sun, 18 Jan 2009 15:21:30 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122554 [...] Since reserve growth is a function of both the current account balance and capital outflows, it is possible that the rise in capital outflows could overwhelm the rise in the current account surplus. That seems to be what happened in q4. [...] [...] Since reserve growth is a function of both the current account balance and capital outflows, it is possible that the rise in capital outflows could overwhelm the rise in the current account surplus. That seems to be what happened in q4. [...]

]]> By: Judy Yeo http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122508 Judy Yeo Sat, 17 Jan 2009 12:44:02 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122508 Chipping in with my 3 cents worth; am standing by my earlier guess that China's more likely to take the 98 line than depreciation (at least one telegraph writer seems to think the same, hey some safety in numbers). As for treasuries, guessing China won't stomp on the brakes but probably discreetly (if that were even possible)releasing the accelerator which means any observable signs of slowdown in treasuries purchase will only feed through 2nd/3rd quarter. as for outflows, not much of a surprise, the question is how feasible barriers are, without sparking greater fear and provoking that cascade of reaction. Am thinking Pettis must be basking in much the same manner as Roubini was last year?! The theme for the coming year in China's probably conservatism, stimulus notwithstanding. With subthemes like recapitalization and relooking at the almost inevitable consequences of credit expansion - NPLs. Hot flows will probably intensify and who knows, perhaps the chinese authorities might even be inspired to relook at its reserve invesytment strategies. Chipping in with my 3 cents worth; am standing by my earlier guess that China’s more likely to take the 98 line than depreciation (at least one telegraph writer seems to think the same, hey some safety in numbers). As for treasuries, guessing China won’t stomp on the brakes but probably discreetly (if that were even possible)releasing the accelerator which means any observable signs of slowdown in treasuries purchase will only feed through 2nd/3rd quarter.

as for outflows, not much of a surprise, the question is how feasible barriers are, without sparking greater fear and provoking that cascade of reaction. Am thinking Pettis must be basking in much the same manner as Roubini was last year?!

The theme for the coming year in China’s probably conservatism, stimulus notwithstanding. With subthemes like recapitalization and relooking at the almost inevitable consequences of credit expansion – NPLs. Hot flows will probably intensify and who knows, perhaps the chinese authorities might even be inspired to relook at its reserve invesytment strategies.

]]> By: bluecho http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122410 bluecho Fri, 16 Jan 2009 05:49:28 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122410 Brad: Huijin injected $80B into various China banks before the end of 2006 and became part of CIC in Sep. 2007. I doubt that the $80B has anything to do with $200B CIC capital. Without any solid proof, my impression on the $200B is that those are money TO BE invested back in 2007. Since CDB and ABC recapitalization happened after Sep. 2007, and should have gotten the funding from CIC capital. The CIC chief was quoted that part of CIC capital was designated for CDB and ABC injection when CIC just started. As for pre-CIC Huijin investment in banks, the banks would have used it like normal equity capital. Have been reading news about investment retrieved or withdrawn from large projects, especially in real estate arena. People like Li Ki-shing not only ceased investment on large scale, but has started selling some ultra high-end properties marked as "rent-only" for years. Morgan Stanley is said to be quietly looking for buyers of most, if not all, of its China RE investments, etc. etc. For many international companies, their China operations are probably among the best in terms of profitability and liquidity, wouldn't be surprised to see them trying get all they can out of the country since many parents are bleeding severely. And the currency appreciation expectation are now gone... Brad: Huijin injected $80B into various China banks before the end of 2006 and became part of CIC in Sep. 2007. I doubt that the $80B has anything to do with $200B CIC capital. Without any solid proof, my impression on the $200B is that those are money TO BE invested back in 2007. Since CDB and ABC recapitalization happened after Sep. 2007, and should have gotten the funding from CIC capital. The CIC chief was quoted that part of CIC capital was designated for CDB and ABC injection when CIC just started.

As for pre-CIC Huijin investment in banks, the banks would have used it like normal equity capital.

Have been reading news about investment retrieved or withdrawn from large projects, especially in real estate arena. People like Li Ki-shing not only ceased investment on large scale, but has started selling some ultra high-end properties marked as “rent-only” for years. Morgan Stanley is said to be quietly looking for buyers of most, if not all, of its China RE investments, etc. etc.

For many international companies, their China operations are probably among the best in terms of profitability and liquidity, wouldn’t be surprised to see them trying get all they can out of the country since many parents are bleeding severely. And the currency appreciation expectation are now gone…

]]> By: Twofish http://blogs.cfr.org/setser/2009/01/13/secrets-of-safe-continued-slower-reserve-growth-bigger-trade-surplus-large-%e2%80%9chot%e2%80%9d-outflows-%e2%80%a6/#comment-122404 Twofish Fri, 16 Jan 2009 03:39:15 +0000 http://blogs.cfr.org/setser/?p=4468#comment-122404 bsetser: i hadn’t thought of foreign companies liquidity needs, but now that you mention it it makes sense. holding cash in china made sense if you expected the rmb to go up and didn’t need the liquidit. neither is true now .. Also the sale of billions of dollars in Chinese banks by, BOA, UBS, and RBS may have some impact. The people that ultimately were buying the stakes were holding RMB whereas, the big banks were getting paid in USD. bsetser: i hadn’t thought of foreign companies liquidity needs, but now that you mention it it makes sense. holding cash in china made sense if you expected the rmb to go up and didn’t need the liquidit. neither is true now ..

Also the sale of billions of dollars in Chinese banks by, BOA, UBS, and RBS may have some impact. The people that ultimately were buying the stakes were holding RMB whereas, the big banks were getting paid in USD.

]]>