Their FX reserves are running perilously low. They are looking for ANYTHING they can do to get foreign cash. I'm hearing rumors that they are the ones who tapped out the FIMA facility. Could get ugly.
I know somebody is going to @ me with the 3T number, but the only data I trust is China's holding of Treasuries. That's been falling quickly.
This is huge news for me. They were always swimming in export profits / probably still are / travel limits since COVID means that obvious leak of travelling and spending abroad is plugged.
How could they run out of cash?
...
In any case, Yuan is the new foreign currency. And China has, well, all of it...
Higher reward, similar risk, still perfectly reasonable USD FX reserves.
Economically, demographics are insanely against China and it is not clear that immigration is a viable way for them to close that gap.
Finally, their unique political system has not been tested during a period of low growth. It is not clear they have the political stability to be a reserve currency. Again, the US has been pushing their luck.
> the only data I trust is China's holding of Treasuries
- Do you not trust China's holding of US Federal Agency bonds? like Fannie Mae/Freddie Mac/FHA/SBA? China holds $1.2 Trillion of these, slightly higher interest rates than T-bills.
- Even at their peak, T-bills only formed <7% of China's USD reserves. You really think China only needed $200 billion of FX reserves and everything else is probably faked?
Source on china Treasury holdings - https://ticdata.treasury.gov/Publish/mfh.txt
Source on offical China reserves - https://tradingeconomics.com/china/foreign-exchange-reserves but as I mention, I don't trust this