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Comment by treis | Hacker News Reader

>China has a trade surplus with the US, but is net losing dollars because it has to use dollars to buy oil and other imported goods as very little international trade is transacted in yuan

China is a net exporter to the tune of half a trillion per year. I don't see how they could be running out of dollars. Your first link is behind a paywall so I'm not sure what stats they use to back that up.

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I believe the missing factor is investment. You're likely referencing numbers just for trade. There is also foreign investment to consider. I believe China has been a large net investor for some time and those investments, by their foreign nature, reduce China's foreign reserves as well.

Sure, it's possible they have a net negative dollar flow because of investments. But that's a lot different than having a net negative dollar flow because they're importing oil.

There is some nuance here. We can talk about all of their net flows as if they're denominated in a given currency, but this article is specifically talking about their reserves of a particular currency, and oil is a very large reason for the continued depletion of their dollar reserves, independent of their overall account balance when all of it is converted to dollars. I don't have a good knowledge of what their other currency reserves are, or the feasibility/implications of converting such massive dollar figures between currencies. If you want to provide some more details about the particular figure you mentioned, we might be able to discuss it more meaningfully.

This cite has them at 873B of net exports with about 200B in petroleum imports in 2017:

https://atlas.media.mit.edu/en/profile/country/chn/

The net exports decreased to about 500B for 2018. I can't seem to find a dollar figure for 2018 oil but I've seen articles saying imports are up 10% by volume. So total petroleum imports are less than half of their net export amount. Meaning that they could triple their petroleum imports and still be a net exporter.

Yeah, hard to tell just looking at that data. I don't know what currencies each one of the trade relationships is settled in. The differences in balance with the US there is also similar to what they spend on oil (~11%). If all other trade is settled in other currencies and all oil is bought with dollars(from countries other than the US), they would be about flat in terms of dollar reserve growth from trade. My understanding is that most of their dollar reserves originated from buying dollars w/ yuan in the years after 2009 to help keep the value of the yuan depressed for the sake of trade competitiveness. So that does seem to imply that investment balance is the factor tipping the balance here. Which is probably why the Chinese government has set stringent rules on currency controls for individuals.

Which currency the trades are settled in is effectively meaningless as long as it's hard currency. If they end up with a surplus of Euros and a deficit of Dollars they can easily exchange Euros for Dollars. If they end up with fewer dollars it's mostly by choice.

We're talking about hundreds of billions of dollars here. How confident are you that you could 'easily' do that without major undesired effects?

This cite says the average daily volume of EUR/USD trades is half a trillion a day:

https://www.currenciesfx.com/index.php/eur-usd

So hundreds of billions of dollars a year is small relative to the volumes being traded.

Very little of that is true demand. That corresponds to 10x American GDP annualized.

Net exporter to the U.S... But as the OP points out, they do other things with US$ such as buy oil and invest. You are right that they aren't running out of dollars, but they aren't stockpiling them at the rate of the trade surplus either.

That half trillion net export includes oil imports.

Domestic spending?

Denominated in RMB, which they can print. They aren't spending their USD reserves internally only when they need to purchase stuff from abroad.

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