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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

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.

treis 7y ago
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.
- conjecTech 7y ago
  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.
  - treis 7y ago
    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/ 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.
    - conjecTech 7y ago
      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.
      - treis 7y ago
        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.
        conjecTech 7y ago
        We're talking about hundreds of billions of dollars here. How confident are you that you could 'easily' do that without major undesired effects?
        treis 7y ago
        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 https://www.currenciesfx.com/index.php/eur-usd So hundreds of billions of dollars a year is small relative to the volumes being traded.
        conjecTech 7y ago
        Very little of that is true demand. That corresponds to 10x American GDP annualized.

treis 7y ago

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.

conjecTech 7y ago
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.
- treis 7y ago
  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/ 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.
  - conjecTech 7y ago
    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.
    - treis 7y ago
      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.
      - conjecTech 7y ago
        We're talking about hundreds of billions of dollars here. How confident are you that you could 'easily' do that without major undesired effects?
        treis 7y ago
        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 https://www.currenciesfx.com/index.php/eur-usd So hundreds of billions of dollars a year is small relative to the volumes being traded.
        conjecTech 7y ago
        Very little of that is true demand. That corresponds to 10x American GDP annualized.