China on Pace for $1 Trillion in Investment Outflow

The yuan is overvalued because it is too closely linked with the dollar. Chinese are behaving like Americans (hey, look at all the cheap assets overseas) because the yuan rallied with the dollar in the past year.

China should have loosened up control of the yuan earlier, let it rise higher and choked off the credit bubble earlier. Then it could let the yuan depreciate and still fall to a reasonable level. Now the imbalances are stretched and the potential energy has grown exponentially. All of these numbers so far mainly represent people hedging their bets or diversifying assets. A panic out of the yuan is still crazy talk.

Reuters: China on track to book $1 trillion in total offshore investment by end-2015
China's outbound direct investment (ODI )is expected to surpass $1 trillion for the first time in 2015, as slowing economic growth and rising internationalisation of Chinese business see more local companies investing overseas.

Total direct investment offshore increased to just under $883 billion in 2014, Zhang Xiangchen, Deputy China International Trade Representative at the Ministry of Commerce (Mofcom), said on Thursday.

The commerce ministry on Wednesday reported that non-financial outbound direct investment rose 18.2 percent to 473.4 billion yuan, or $77 billion, for the first eight months of the year.
All of this is good for China in the long-run, but the short-term impact adds more depreciation pressure on the yuan.

No comments:

Post a Comment