Chinese exports are not as FX dependent as people tend to think.
A lot of our export is really "foreign materials+Chinese labour." To export $100 worth of goods, we have to import around half of that in materials.
If Yuan will go above 6 again, manufacturers will switch to making cheaper goods with more foreign materiel, and if it goes the other way around, they will do the opposite.
You don't understand import/export. It's not whether or not you buy material "internationally" and make stuff and sell them internationally. But rather, the action of selling is the one that create the currency demand. In the business, it's known as T+X settlement.
If you do any business internationally (Either thru TT, Third Party Payment, etc), you know money is not settle immediately. That is what we called T+X, what does that mean is effectively, what is then said is your bank temporary owe you the payment for an item until the money is settled.
Let me give you an example on layman term. Say you sell 100RMB worth of item to United States, the other party pay USD, and the bank would need to convert that USD to RMB which is the denomination to your own bank account. Which mean the bank itself would need to adjust their currency reserve by increasing the amount in USD at the same time decrease its own RMB reserve by 100 and increase your RMB balance in your bank, and until that USD (whatever amount it was, since I have no time to go check the exchange rate) is credited, the bank is 100 RMB short, because the bank pay you 100 RMB. And since settlement time varies, the bank is out for 100 RMB for the duration of settlement. (The duration is depending on the time difference, US/China bank clearance procedure, and some other factor)
So, basically, when your order is filled, you gain a handsome 100 RMB, and the buyer is waiting on the item you sell them, however, your bank is 100 RMB out of pocket. Which they need to fill somehow. Now imagine there are millions of people like you, selling hundred of thousand of good internationally between China and international destination. Just say a million Chinese sell 100 RMB stuff at the same time to overseas, the bank would temporary be in debt for 100 millions RMB at that instant.
Now, the more the export, the more this gap will lead to such debt (pretty obvious), and there are only 2 ways to deal with it.
1.) Print more money as more export demand. Which is honestly quite stupid. You print money will devalue your currency. (Which by the way is what US want in this trade war)
2.) Use other people money, that's what Forex is for, to balance the balance book with your own currency. When you need more RMB in reserve, you borrow from the Forex. Say if in a pinch, a spike of Chinese export increases, it also increase the demand of RMB, and what the bank and the government do is they take money out form Forex (Borrowing) and put it in the bank and settle that in place of RMB, and when the debt settled, you put the money back into Forex, in the previous example case, you take USD out from your Foreign Reserve and put them back when the USD was cleared by your US Buyer.
That is why export orientated nation all depends on their Foreign Reserve. And if China is dumping the T-Bill, that mean they will need to either acquiring more Forex form other country (like GBP, Euro and so on) to compensate, which would be the same, because your buyer is in US, they don't pay you with GBP, Euro or etc, or they will need to increase their monetary output to compensate. And again, this is actually what US wanted, because Printing 1 trillions USD worth of RMB would put China in financial strength more so than the American, because the American can simply find someone else to buy the T-Bill, which in these case, Japan happily bought them.
Lol @ OP using source from QQ. Let them live in their bubble, they probably don't even understand the basics of finance.
Meanwhile in the real world, the Chinese government is trying to develop an offshore market for Chinese companies to raise funding in USD. The Chinese government must be stupid then, if the USD is collapsing according to them.
https://www.scmp.com/business/banki...ns-record-sale-dollar-bonds-worth-us6-billion
There's another guy
@Han Patriot who claimed that China's holding of US bonds is a WMD which can destroy the USD. I pointed out that Japan holds even more US bonds than China and can destroy the USD too according to his logic. But he turned around and say, Japan is different; they are simply paying tribute to the US.
China holding US bonds = WMD
Japan holding US bonds = Tribute
What double standards. So I say don't bother talking logic to nationalistic fanatics like them, they can't even make a coherent argument when it comes to their country.
To be honest, I think only the gullible people here will think that is anything significant.
To us Financial Trained people, it's just another day at the office.
But you need to admire how people can blow something out of nothing and jump up for joy, I mean how stupid will you see that's something indeed needed to jump for joy lol
And good catch on the QQ reference, I did not actually read the reference.
You didn't believe that China will economically disengage with the US, and how you can eat more crows.
The US bonds are toxic financial assets, no one will buy it anymore. Most countries in the world will just follow suit just like they choose Huawei as the main provider for their 5G network.
So, still holding 1.1 trillions US Treasury bond and is currency no 2 spot (not by much actually) of US T-Bill holder is "Disengaging" with US economically? You need to understand what's "Disengaging" mean
Going by the current rate (China shredding 2-5 billions each months) It will take at least 20 years to fully shed the T-Bill 40 years if we use the low end estimate
And lol at US Bond are toxic, I mean you are the only person who said that, other people will point and laugh at China for taking a loss and dumping the T-Bill, Japan, in particular, have that smile on its face when they took the T-Bill of China.
According to their logic of dumping US bonds.
It was sarcasm by the way.
I think this post is the golden rooster as to show who lack financial knowledge, now we all know who is not well versed in these matter...
How will this affect the trade war? More leverage to China I'm guessing.
If you really believe the Chinese member here, this is put US Dollar in big trouble..LOL 700 billions is less than 1 year of US Military spending..
US financial asset is upward to 249 trillions, USD alone have a settlement rate of 9 Trillions per day in transaction all over the world. Dumping 700 billions don't even dent the US Financial Asset and outlook, Infact, the only way China can sell is at a loss (not a big loss but a loss regardless) to find someone to buy it, otherwise they cannot sell them.
But the most it hurt is Chinese own financial asset, think about it, with the T-Bill gone, the Chinese Central bank would need to replace it with something, either it's another foreign asset or to produce more monetary product to compensate, which 700 billions over 4 years would put strain to Chinese own money value.
Have a full explanation on the post above, you can read them.
I didn't mean that.
也不认为中国会抛售美债，看起来是自己会吃亏。
我只想说他引用的消息(源和数据)没什么问题。
I think you are probably the only member here get what would happen actually...
but yes, you are right, the Data is correct, China is indeed selling US Bond in 2-5 billions a month since 2019.
This is the actual list from US Treasury
https://ticdata.treasury.gov/Publish/mfh.txt
