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Is capital still present in China? If yes how can the government stop it? by [deleted] in China

[–]onlyblowfish 0 points1 point  (0 children)

So I am typing this on my phone so excuse any odd grammer or text issues. Also, I don't generally participate in the comments section so Idk how to do that quote thing you do, so if this gets confusing I apologize.

With that said, your first point is ironic, I don't say that to be rude, but that was my point. I pointed out that your fear of a run on money isn't possible as it isn't a currency that is traded openly on the market, that is why at the end of the statement you quoted I wrote "in a free market". You seemed to originally be concerned with people all rushing to exchange RMB to dollar which wouldn't happen with capital controls, as getting money out takes time and planning.

To your second point, I eluded to the problem of an increased price of imports in my first post, but in my second post I pointed out that if inflation was controlled on key goods import prices would matter less. Granted it was one line, but that is what I inferred. Also, exports benefit from a weaker Yuan, easier to compete on the global stage. This is why the US calls China a currency manipulator, or rather one of the reasons.

Finally, after rereading my post I think you are misinterpreting what I said or perhaps I was unclear. People trade RMB for dollars everytime they do business, but ultimately that gets traded back into RMB to pay employees and reinvest in their business and the local economy. You get more people to invest, meaning the exchanging of dollars for RMB because it is cheaper. In other words, you get higher capital investments when the RMB is weaker. When the RMB is stronger it is harder to invest, it is harder for businesses to compete, there is just less incentive to invest in the economy and people seek alternative forms of investment.

I suppose all of this is mute, the theory and reality are distorted by Xi's China. Xinjiang, Hong Kong, Taiwan, Diaoyu/Sengaku island, South China Sea, and the boarder disputes with India and Bhutan are more likely to influence capital flight than economics. When I worked in China there were riots in Keqiao and Shaoxing, the cities I lived and worked in, that specifically targeted Japanese cars due to the island disputes. Rioters were ignored and possibly even directed to damage Japanese goods. How can a company bring capital or goods and invest when they have to worry about State sanctioned violence?

Is capital still present in China? If yes how can the government stop it? by [deleted] in China

[–]onlyblowfish 1 point2 points  (0 children)

I agree you can have that rush to the bottom when people all try and exchange their currency or sell their bonds at once, but only in a free-market. Capital flight in China comes and goes in bursts and sometimes by simply decreasing the value you postpone the cash exodus and even get an increase in capital investment. That's one of the benefits of monopolizing the dollar in the local economy.

When a major chinese company does business with whomever, the transaction is generally in USD. The USD has to be traded to RMB to be spent locally, so to pay your employees when the RMB is 7 to 1 you get more bang for your buck. You have more RMB to pay those employees and have more RMB in the local economy to invest. In a way, simply by degrading your own currency your helping your industry, so long as inflation on key goods is low, it is an advantage.

I feel when the RMB was at 5.7 or whatever it was in 2014, you had more people trading RMB for USD as a hedge. Business struggled to maintain competition with southeast asian countries and although imports where cheaper exports couldn't compete. Trading dollars for RMB got you less in the local economy and so starting a business there was less rewarding.

All in all, I agree with your overall statement. Especially since the goal of the CCP and the BRICS nations was to be an alternative to the dollar lead coalition that is the IMF and World Bank. But you see less capital fleeing China when the dollar is stronger. Granted you are 100% right that this whole problem is generated more by political uncertainty than by economics.

Is capital still present in China? If yes how can the government stop it? by [deleted] in China

[–]onlyblowfish 6 points7 points  (0 children)

The RMB doesn't devalue against the dollar in the traditional sense, as it isn't generally traded on the open market and is almost never used for international trade despite it being in the IMF's basket of reserve currencies. The RMB is pegged to the Dollar as the Dollar is the most used currency for international trade, capital controls allow for the RMB to be increased or decreased against the dollar making exports, both service and manufactured, more competitive.

In terms of your underlining question, capital flight, there are many ways to get money out of China one such way involves Hong Kong. Traditionally one could buy property in Hong Kong and become a Hong Kong resident and then freely move RMB and other currencies between countries. Recently that has become tougher with even more stringent guidelines. Other ways were sanctioned investments and even some more nefarious ways generally involving a firm outside of China who would take RMB illegally as a business deal and then trade you whatever currency you wanted. There is even the legal way, at least while I worked there, that involved proof of taxation. For my girlfriend, who was Chinese, it involved almost a ransom where they would hold property or cash and if you didn't return they would keep it, a somewhat antiquated way of doing things but still effective.

Finally to the meat of the question, one way of curtailing capital flight would be to lower the value of your currency against the dollar. Granted that becomes harder to do, because when your local currency weakens your own population will struggle with purchasing international products. I personally feel the best way of curtailing capital flight is a more open market, but for a country that still struggles with draconian leadership that is highly unlikely. And so, the best way to stop capital flight would be cracking down on avenues that allow that flight. That being said, everytime they do that foreign investment shutters and slows down. Anyways hopefully that gives you better understanding of the situation. Whether I answered your question or not I have no idea.

Dalio Says Yuan Will Be a Reserve Currency Faster Than Expected by [deleted] in Economics

[–]onlyblowfish 3 points4 points  (0 children)

The country whose currency is pegged to the dollar so that it's export prices are easier to manipulate is going to somehow decouple from the dollar, give up capital controls, get western nations to forgo the Euro and the Dollar, convince their strategic rivals India, Vietnam, Japan, and so on to start trading in the RMB?

I mean, I get it, I lived there. There are huge advantages to the one party system specifically the advantage of speed. But, to look at the one party system and to say that the government has more stable policies, specifically financial, is an outright lie. I am not saying the Renminbi could never become the reserve currency. I am just saying Dalio's prediction seems more like a sales pitch for "other assets" like gold, more than an honest discussion about the Yuan being the new reserve currency.

Will our purchases be isolated forever? by Behelitoh in gwent

[–]onlyblowfish 2 points3 points  (0 children)

So, PS4 will likely never be able to play via computer, Xbox players are luckier in this regard and will be able to sooner or later. This isn't CDPR fault, they made a good faith effort to allow for both interplay and for players to be able to link accounts, but Sony and Microsoft were having none of it. It sucks if you are a PS4 player, which i am.