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Chinese state banks have substantial dollar deposits (it is largely state banks that are lending to companies like Evergrande offshore). The PBOC stopped issuin
by hogFeast 5y ago
Chinese state banks have substantial dollar deposits (it is largely state banks that are lending to companies like Evergrande offshore). The PBOC stopped issuing notes (and sterilising the dollar inflow) years ago, and onshore dollar deposits are above $1tn. A lot of the stuff you read about this online is exceptionally misleading (I have no idea why there is this cottage industry of "economic experts" who don't understand economics...it is parallel to the gold bug industry, it is very weird).
- knowmylimits 5y agoWhat do you mean that they stopped issuing notes. China expands their money supply almost as much by percentage compared to the US.
- hogFeast 5y agoDomestic banks were not allowed to hold USD deposits (because that would have meant export earnings leaked into the Chinese money supply and the RMB would have risen), so when an exporter deposited earnings with them, they would take the dollars to the PBOC who would issue them with an interest-bearing note. Around 2017/18, the PBOC stopped doing this and allowed domestic banks to retain and invest the dollar earnings that exporters deposited. China's money supply is not directly related to the US money supply. China's capital account is still closed. All that has changed is that the onshore dollar market has increased (the PBOC retains a huge amount of control over lending decisions, Chinese state banks are not investing in US markets, it is being retained in China).