One of the great mysteries of the year is why domestic money appears to be fleeing China.
Some numbers from StanChart in the FT show that it may not be as large of a problem as feared. They show that importers simply aren’t converting their receivables into yuan.
Over the summer we spotted a big increase in USD deposits at China’s commercial banks, suggesting that corporates and households were keeping dollar receivables and/or converting more CNY into dollars.
Given the sub-standard returns in Chinese stocks this year and the never-ending rumors about economic data manipulation, many analysts (including me) have been wondering what Chinese domestic investors knew that the rest of the world was missing. This helps to calm nerves, even if it doesn’t tell the whole story of why they are holding onto dollars.
