16 ms·
Chinese banks cause alarm as capital flight measures intensify
- Bayart 4y agohttps://archive.is/oL6cx https://archive.is/oL6cx
- refurb 4y agoMeanwhile, China’s ruling party is intent on attracting inbound foreign capital. Somehow i think that may be a challenge. There may be money to be made in China, but if you never know if you can get it out thats going to put a damper on things.
- notch898a 4y agoSeems like fairly easily dealt with by foreign big capital kind of money. They can just buy some commodity with their chinese cash, export it as a trade good, then import it in the country of choice and sell it and deposit it in their account. Sure you may lose 20% of profits in the process but that's probably ok if you're getting access to an untapped market.
- charlieyu1 4y agoSales doesn't go up suddenly just because you import extra to sell
- onethought 4y agoIt does, if as the gp stated you sold it for 20% less.
- refurb 4y agoA even better method is to start a business in China and get permission to send money overseas to buy “supplies”. I was talking to guy in California who got an order for $1M in chips from a Chinese company. He had done tons of business in China and even had a factory there. Sent the invoice ahead of time (no product shipped) and the guy in China went silent. His theory was that they used the invoice to get approval to exchange to USD and send it to the US. They probably edited the invoice to change the bank account the payment was made to. That worked years ago, but nothing stops the Chinese government from clamping down on it.
- Logans_Run 4y agoI'm not so sure about that. China has brought a lot of US debt https://www.ey.com/en_cn/china-overseas-investment-network/overview-of-china-outbound-investment-of-2022 https://www.ey.com/en_cn/china-overseas-investment-network/o...
- syzarian 4y agoI don’t see how China buying U.S. debt would lead to more inbound foreign capital into China. Can you elaborate on this?
- enkid 4y agoWouldn't that be Chinese capital investing in the US?
- drumhead 4y agoThats because they need to put their export earning somewhere and US govt debt is the safest place to put it.
- ChatGTP 4y agoThey bought US debt because they are confident the US will pay it off, it’s a ROI? Not to attract capital…
- fuoqi 4y agoNo. They bought it because the excess capital produced by artificially low exchange rate used to stimulate domestic production and exports is too big to be parked anywhere else.
- sixQuarks 4y agoNot only that, look what they did to the Chinese stocks, not to mention their idiotic covid zero lockdowns. No investor can trust the government to not fuck up everything.
- fuoqi 4y agoThey do not need foreign capital per se. They need foreign business expertise and technology in areas where domestic ones are not sufficient at the moment. For pure capital they have more than enough in US debt, maybe even too much, since they try to allocate as much of it as possible (e.g. using the one belt initiative) without launching RMB exchange rate into space. With the mounting up US sanctions, trade wars, and "friend-shoring", China will have less and less interest in western investments.
- refurb 4y agoTrue, but foreign business expertise and technology uses goes hand in hand with foreign investment (otherwise, why bother?). So China isn't going to get the former, if they don't make the later easier. Ease of capital flow is one reason why Singapore has done so well (among many reasons). You can turn Singapore dollars into whatever currency you want, in whatever quantities and move it out of the country with no barriers at all. Plus the rule of law, which means the government is predictable in its decision making. Singapore isn't going to turn around and nationalize a bunch of foreign industries any time soon, because they realize the second they do, all that foreign capital is going to disappear very quickly.
- fuoqi 4y ago>why bother? For example because your production capacity in China will produce your stuff for cheap and you will be able to sell this stuff with a good markup? You will not be able to easily sell the production capacity and move the resulting capital outside of China as you would in the US or EU, but as long as it operates it will generate you profit.
- refurb 4y agoThat could work in low capital intensive industries, but I'm not sure the numbers would work out for high tech, high capital intensive industries where you need to invest billions that you may never be able to recover.
- moremetadata 4y agoLooks like a crypto currency event might be happening if the 2009 Greek govt and banking collapse was anything to go by. Looks like we'll be seeing just how underground crypto currency is with the Chinese Rich. Anyone spotting any patterns to confirm in the blockchains? https://www.scmp.com/tech/policy/article/3196781/chinas-cryptocurrency-market-still-among-worlds-strongest-despite-beijings-crackdown-trading-mining https://www.scmp.com/tech/policy/article/3196781/chinas-cryp...
- adaml_623 4y agoDo you think it's feasible to mine bitcoin to 'export' wealth from China? Or is there a way to buy bitcoin with Renmimbi?
- ReflectedImage 4y agoChina mines 50% of all bitcoins
- Brybry 4y agoLooks more like ~20% post-ban.[1][2][3] [1] https://chainbulletin.com/bitcoin-mining-map/ https://chainbulletin.com/bitcoin-mining-map/ [2] https://www.cnbc.com/2022/05/18/china-is-second-biggest-bitcoin-mining-hub-as-miners-go-underground.html https://www.cnbc.com/2022/05/18/china-is-second-biggest-bitc... [3] https://worldcoin.org/articles/china-crypto-ban https://worldcoin.org/articles/china-crypto-ban
- ikekkdcjkfke 4y agoI wonder how many tonns of coal they burned
- tommek4077 4y agoBecause that is what you would care of if you try to bring your wealth offshore.
- 4y ago
- adaml_623 4y agoI wonder what the billionaires do to get their money out? Do they pay people to travel with jewellery that gets sold for foreign currency once it's outside China? Do they overpay for imported goods and get the difference paid into a Swiss bank account? It's always interesting to me how really wealthy people pay for loopholes
- diceduckmonk 4y agoThey send their children overseas to overpriced universities, and are allowed to justify buying luxury cars, and other school related expenses. I don’t think the mentality on these expenses is getting a 1:1 conversion rate, but that money is meant to be spent. There’s various ways they can fund their children’s business ventures (passion projects) overseas without expecting it to ever turn a profit. With the nepotism in Asia, it doesn’t really matter what degree the children of the elite gets, but more school is always viewed as favorable, possibly even moreso than practical work experience sometimes. This is why you see a proliferation of masters and graduate programs in the United States that don’t require GRE or standardized exams. Obviously it’s a different story for the employment seeking middle class. To your point, it’s not uncommon or a bad idea for the student to study the arts or art history degree either.
- pessimizer 4y ago> They send their children overseas to overpriced universities, and are allowed to justify buying luxury cars, and other school related expenses. And real estate.
- MonkeyMalarky 4y agoLike that one Chinese student buying a $31M house in Vancouver!
- simonh 4y agoBuy crypto in China, sell it abroad. At least that was one approach. Note if you do it fairly quickly it doesn't matter what the value of the crypto is, just the liquidity. Another way is 'business' investments in other SE Asian countries, that then get liquidated and moved further abroad. China does a lot of business with S. Korea for example. If you have an export company, and China exports a lot, you can hold a portion of the foreign earnings abroad and just keep them there.
- 1letterunixname 4y agoIt's my opinion there are generally 4 kinds of Chinese UHNWIs: 1. Mainland with no interest in foreign investment 2. Mainland mostly with some foreign investments 3. Split between mainland and foreign 4. Trying to move mostly foreign while keeping some in mainland (generally to take care of family or business concerns back home) In the US as a more stable asset haven, hot real estate markets are usually where large piles of cash are parked by global investors, not just Chinese. The people in the 4th group often try to emigrate because individual property rights still aren't fully guaranteed in China. (Jack Ma is an example.) You would too if your neighbor had their assets seized or frozen arbitrarily.
- ginko 4y agoWhat’s a UHNWI?
- IdiocyInAction 4y agoUltra high net worth individual
- ur-whale 4y agohttps://en.wikipedia.org/wiki/Ultra_high-net-worth_individual https://en.wikipedia.org/wiki/Ultra_high-net-worth_individua... TL;DR: net worth more than 30MUSD
- diceduckmonk 4y agoI mean technically people can’t own land in China, they’re just leasing it from the government. This assumption has been baked into real estate prices but people bid it up anyways.
- onetokeoverthe 4y ago[dead]
- enkid 4y agoThen I don't think the assumption is built into real estate prices.
- bigcloud1299 4y agoMeh. Clickbait. Their economy is just opening. They are facing same issues as India and USA. Worker shortages as many return back to their native villages and then have to return back to work or find a diff work. New workers must be retrained.
- andy_ppp 4y agoAre the increasingly tight capital controls a precursor to a war with Taiwan or because the CCP expects some other shock to occur? Is their economy expected to crash for some other reason or is this simply dictatorships love centralised control over everything especially capital?
- foota 4y agoCould be in preparation for supplying arms to Russia.
- ChemSpider 4y agoThat possibility makes me really nervous. A few weeks ago I was pretty sure that Beijing would not be that stupid, and simply stick with sending tons of dual-use goods, to keep up the plausible deniability. But Chinese rockets hitting Ukrainian kids in Kyiv/Europe? That would trigger dramatic sanctions. I don't think that is priced into the current world stock market.
- pessimizer 4y agoIt's not stupid. It's bold and almost risk-free. The US aren't the only people allowed to do proxy wars.
- duxup 4y ago> almost risk-free Wouldn’t the article indicate otherwise?
- ajvs 4y agoThe risk is that China becomes a pariah to the West, which much of their economic system depends on.
- TexanFeller 4y agoThe US depends on China to a level where I'd say they own us, not the other way around. They play a large part in making almost every product we use in the US, without trade with them we're screwed.
- wunderland 4y agoCapital flight will decrease (in the medium term, like by the end of the decade) as US Dollar dominance diminishes. Oil trades between China-Russia-India are now denominated in Rupee-Rubles or Renminbi-Rubles starting only this past year, and so the groundwork is already laid.
- kasey_junk 4y agoMaybe. But that’s not how it has worked in the past. In other cases capital controls like this cause international businesses to not trade in the currency and to instead demand other currencies to settle accounts, causing more capital flight. There is an example in the article of an investor with money stuck in China. They won’t be doing as much investment as they would if the currency was liberal for instance. The western currencies dominate foreign trade for lots of reasons, but the biggest by far is that they are easy to move.
- madspindel 4y agohttps://www.youtube.com/watch?v=LiR54FPQiCs https://www.youtube.com/watch?v=LiR54FPQiCs
- lvl102 4y agoWhy would USD dominance diminish? Something like 90% of IP is based out of the US. Chinese education system is a complete joke (as evidence by brain drain).
- fuoqi 4y agoBecause having a global reserve currency strongly relies on network effects and USD share in international trade is failing steadily? How much of this IP heap is an utter trash like software patents and patents on black rectangles generated just to be added to a patent pool? From my (surface-level) understanding school-level education in the US has much bigger troubles compared to China, but luckily for the US it gets compensated (for now) by sucking brains from all over the world into the well established system of universities. And it's not like China has no experience with playing extremely loosely with IP laws.
- dragonelite 4y agoHave been hearing these kind of "capital flight" stories for decade plus now somehow big financial institutions keep pushing more FDI into China. See i'm not an economist but you can't that sounds a bit counter intuitive too me. One story says China has capital flight and you have other stories talking about more and more Foreign directed investment into China.
- marcus_holmes 4y agoThe article is talking about retail banking, which is different from investment into stocks and shares. It's perfectly possible to have retail banking customers living abroad removing large amounts of capital from China, while at the same time foreign investors are injecting large amounts of capital into China. Two different flows. I think the biggest impact is going to be places like Australia that benefit greatly from Chinese nationals abroad at the moment. There are lots of Chinese students and Chinese property owners in Australia. If they can't get access to their money, that's going to hurt Australia more than China.
- coffeeblack 4y agoDo Australians benefit? Not being able to buy houses.
- marcus_holmes 4y agoAgree totally. Australian development companies (and some of them are part-owned or fully-owned by Chinese nationals) benefit from the property investment. And Aussie Universities are basically funded by Chinese students now (not that the quality has improved, just the staffing levels). But the average Aussie doesn't benefit. Imho we should do what the Asian countries do: disallow buying property in Australia from non-Aussie citizens (or at least non-residents).
- rendall 4y ago> ...and you have other stories talking about more and more Foreign directed investment into China. Source? All of my sources have it that foreign investors are shy after consistent rounds of government interference and even nationalization.
- koreanguy 4y ago[dead]
- Overtonwindow 4y agoCan China prop up its economy forever? There has been some alarming articles about China's economy the past year, particularly that the real estate market, exports, and other issues are putting the company into a very terrible financial situation. However, the government in China IS the bank. They can declare a company solvent that is not, bailout anyone and everyone, shut down companies at will, etc. In such a non-market economy, where the government controls everything, how does one measure the economy and its likelihood of implosion?
- spywaregorilla 4y agoI've seen this idea expressed on HN a few times recently. I don't get it. The mechanics are really not that different from any other country. If you print billions to bail out entities you get rapid inflation. The big things at risk are real estate prices and local governments. You can't easily wave this away regardless of your level of control.
- Overtonwindow 4y agoWhat would stop a country with full control from simply printing money and saying "inflation? What inflation?" Where will the cracks show and how will they show?
- spywaregorilla 4y agoThink about what inflation is. Does the US make inflation real by acknowledging it? Or is it there even if we don't recognize it? The cracks appear the same everywhere. You have large debts that need to be paid. You want to exchange cash for value. If you suddenly instantiate cash in large quantities to pay those debts, the ratio of cash:value suddenly gets a lot bigger. People start saying "hey, I was saving $10 bills in my wallet, and now everyone's passing around $1000 bills, what's up with that?" (hyperbolic and illustrative). Foreign entities taking your local currency start saying "hey, if you're gonna keep printing this stuff, I'm gonna need more of it to stay ahead of the curve and get 'my share'". Everyone needs to nudge up prices a little bit because they buy from others who raised prices, and that means labor prices need to rise. etc. etc. When it is easier to get ahold of currency, the "value" of the currency goes down. If you're not producing increasingly more valuable stuff to offset that, it starts to mean prices rise.
- photochemsyn 4y agoNation-state controls over capital inflows and outflows are not necessarily a bad idea, and were an alternative system proposed in the 1970s. Of course, the USA instead championed neoliberal trade policies that largely eliminated such controls, relying instead on petrodollar recycling to manage the balance-of-payments issues. It's worth taking a look at conditions in 1978 for context: https://www.nytimes.com/1978/04/30/archives/the-nation-the-idea-wont-float-working-within-the-system.html https://www.nytimes.com/1978/04/30/archives/the-nation-the-i... > "It is not just the capital outflow from the United States that has so hurt the dollar. Once, American capital outflow abroad was largely offSet by a surplus in trade. But the United States, has now slipped into a deficit in trade as well as payments, both because of its huge oil bills ($48 billion last year alone) and a weakening of exports, as other countries have grown more slowly and so have been importing less..." > "Furthermore, capital flows are now even more important than trade flows. The meeting of OPEC in Saudi Arabia that starts Saturday, aimed at revaluing the oil‐producing countries’ dollar holdings, could have an even bigger impact on the dollar than the oil trade itself. Government holdings of the oil exporting countries total over $60 billion in monetary rerserves. Private holdings are unknown. Despite all the dollars that have flowed out, the United States is still trying to play the role of banker to the world, still providing the key currency for the world monetary system..." The complexities of petrodollar recycling - weapons deals, aid programs, secretive Wall Street foreign investment funds, etc. - are generally not a subject of discussion in the western corporate media, but here's a good overview from 1985: "Petro-Dollar Recycling: Imports, Arms, Investment and Aid" (1985), Gerner https://sci-hub.se/10.2307/41857746 https://sci-hub.se/10.2307/41857746 It's worth noting also that current USA-Russia tensions really began in 2003 when Putin largely rejected membership in the petrodollar recycling system, and similar issues arose with Venezuela and later, Libya. Chinese oil imports are on the order of $175 billion per year, so they're apparently facing the same problem the US did in the 1970s. However, they're also building out renewable capacity faster than any other nation, which is the best way to escape fossil fuel dependency.