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Sell Treasuries --> USD Cash What is being done with the USD Cash generated after the sale? Are the Chinese immediately selling the USD Cash to local CNY hold

by jhulla 11y ago

Sell Treasuries --> USD Cash What is being done with the USD Cash generated after the sale? Are the Chinese immediately selling the USD Cash to local CNY holders in order to defend the peg? What do they do with it next? Is the new USD Cash leaving Chinese borders? Does it stay in local accounts - eventually to be used to buy up other USD denominated assets?

chkuendig 11y ago
as the article says, they try to keep the yuan up. so they sell treasuries and buy yuan with the usd from the sales. (what they then do with the yuan doesnt matter, its theirs anyway)
- jhulla 11y ago
  What is not clear is this: 1. Who is selling the CNY for USD? Specifically is it another arm of the government? 2. More importantly: what is the new holder USD allowed to do with their newly acquired USD cash pile? Are they allowed to transfer it out of the country? Or are they required to keep it in USD, but it in Chinese banks? Are their restrictions on what they can buy?
  - chii 11y ago
    > Who is selling the CNY for USD? i m guessing currency traders, who sees a good deal selling their CNY for USD for more than they purchased the CNY prior.
  - URSpider94 11y ago
    The CNY are coming from the open market, people who have yuan and want to have dollars. Since it's the open market, they can do whatever they want with those dollars after the trade. Thus, this is putting more dollars into circulation.
  - leereeves 11y ago
    I assume China is making these trades in the foreign exchange market. (Which is like a stock market for trading currencies.) https://en.wikipedia.org/wiki/Foreign_exchange_market https://en.wikipedia.org/wiki/Foreign_exchange_market If so, anyone could be on the other side of the trade, including other governments, banks, speculators, investors, and businesses. The USD are transferred to the other party, out of China if appropriate.
deathhand 11y ago
My armchair hypothesis is that Chinese central planning allows them to off-set the burden of USD to large corporations(Sinopec,ICBC) and purchase cheap energy. With current crude prices they can easily purchase large enough volumes to increase the price and hold on to a valuable commodity. America is for sale.
deleted 11y ago
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dageshi 11y ago
Companies, individuals, investors e.t.c. are moving their money out of the yuan back into the dollar, China is selling some of its treasuries to get the dollars to give to these people. I expect the vast majority of it is leaving the country.
- beauzero 11y ago
  this.
- ars 11y ago
  Isn't that against their goal of making the Yuan part of the Special drawing rights? If there are fewer Yuan internationally (and more in-country) they have a worse case for that.
  - dageshi 11y ago
    The bigger hurdle to the SDR is I believe it has to be a free floating currency, which the Yuan is not. Also, I mean, what are you going to do? If people want to get their money out and you're not going to completely forbid them from doing so then you have to pay up. If you want to maintain your peg and pay up you need dollars to do it, which you have in the form of treasuries.
deleted 11y ago
[deleted]
- beauzero 11y ago
  absolutely no. with ren pegged to usd and usd climbing this is terrible for continued 7% Chinese GDP growth (their state published ave. who knows what actual GDP is). they want their currency devalued vs. usd and are actively moving it lower. products that are cheaper vs. other currency = greater sales/growth. this is why other EMs are starting to devalue. world is scare another 97-98 asian currency war is coming.

by jhulla 11y ago

chkuendig 11y ago

as the article says, they try to keep the yuan up. so they sell treasuries and buy yuan with the usd from the sales. (what they then do with the yuan doesnt matter, its theirs anyway)

jhulla 11y ago
What is not clear is this: 1. Who is selling the CNY for USD? Specifically is it another arm of the government? 2. More importantly: what is the new holder USD allowed to do with their newly acquired USD cash pile? Are they allowed to transfer it out of the country? Or are they required to keep it in USD, but it in Chinese banks? Are their restrictions on what they can buy?
- chii 11y ago
  > Who is selling the CNY for USD? i m guessing currency traders, who sees a good deal selling their CNY for USD for more than they purchased the CNY prior.
- URSpider94 11y ago
  The CNY are coming from the open market, people who have yuan and want to have dollars. Since it's the open market, they can do whatever they want with those dollars after the trade. Thus, this is putting more dollars into circulation.
- leereeves 11y ago
  I assume China is making these trades in the foreign exchange market. (Which is like a stock market for trading currencies.) https://en.wikipedia.org/wiki/Foreign_exchange_market https://en.wikipedia.org/wiki/Foreign_exchange_market If so, anyone could be on the other side of the trade, including other governments, banks, speculators, investors, and businesses. The USD are transferred to the other party, out of China if appropriate.

deathhand 11y ago

My armchair hypothesis is that Chinese central planning allows them to off-set the burden of USD to large corporations(Sinopec,ICBC) and purchase cheap energy. With current crude prices they can easily purchase large enough volumes to increase the price and hold on to a valuable commodity. America is for sale.

deleted 11y ago

[deleted]

dageshi 11y ago

Companies, individuals, investors e.t.c. are moving their money out of the yuan back into the dollar, China is selling some of its treasuries to get the dollars to give to these people. I expect the vast majority of it is leaving the country.

beauzero 11y ago
this.
ars 11y ago
Isn't that against their goal of making the Yuan part of the Special drawing rights? If there are fewer Yuan internationally (and more in-country) they have a worse case for that.
- dageshi 11y ago
  The bigger hurdle to the SDR is I believe it has to be a free floating currency, which the Yuan is not. Also, I mean, what are you going to do? If people want to get their money out and you're not going to completely forbid them from doing so then you have to pay up. If you want to maintain your peg and pay up you need dollars to do it, which you have in the form of treasuries.

deleted 11y ago

[deleted]

beauzero 11y ago
absolutely no. with ren pegged to usd and usd climbing this is terrible for continued 7% Chinese GDP growth (their state published ave. who knows what actual GDP is). they want their currency devalued vs. usd and are actively moving it lower. products that are cheaper vs. other currency = greater sales/growth. this is why other EMs are starting to devalue. world is scare another 97-98 asian currency war is coming.