EU and US look to gang up on China after trade war truce

[nang2]

International creditors also have their limits, or own plans (of course they do), so the bulk of debt would be absorbed by the Fed anyway, just look at the Fed's staggering balance sheet and imagine if inflation can't be contained.

View attachment 789931

Recent balance sheet trends

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

Fed's balance sheet is never intended to absorb inflation. Fed prints money to buy US bonds. US government gets the money to buy US products/services. Inflation is ensued. Only the printed money held by international creditors is absorbing inflation so long as they only buy US bonds.

 

[Shotgunner51]

Fed's balance sheet is never intended to absorb inflation. Fed prints money to buy US bonds. US government gets the money to buy US products/services. Inflation is ensued. Only the printed money held by international creditors is absorbing inflation so long as they only buy US bonds.

Exactly

 

[nahtanbob]

Weird logic, who taught that?

Who is going to lose when China sells $181 billions more ?

If European leaders lose power they can relax in their homes. When Chinese leaders lose power it is not pretty

 

[Shotgunner51]

Who is going to lose when China sells $181 billions more ?

When US, a deficit country, raise trade war on China, China turns up winning and amassing even more surpluses than before. It's a cold hard reality no matter however painful for one to swallow. Now with EU similarly on deficit side, if also raise war on China, you expect EU to win?

If European leaders lose power they can relax in their homes. When Chinese leaders lose power it is not pretty

Weird logic again, we're talking about EU starting trade war with China, why derail into studying politicians' retirement plan?

 

[nahtanbob]

When US, a deficit country, raise trade war on China, China turns up winning and amassing even more surpluses than before. Now with EU similarly on deficit side, if also raise war on China, you expect EU to win?

Weird logic again, we're talking about EU starting trade war with China, why derail into studying politicians' retirement plan?

What makes you think trade wars won't lead to complete ban on trade ?

 

[nang2]

When US, a deficit country, raise trade war on China, China turns up winning and amassing even more surpluses than before. It's a cold hard reality no matter however painful for one to swallow. Now with EU similarly on deficit side, if also raise war on China, you expect EU to win?

I don't think China is winning by hoarding US dollars. It only imports inflation and hurts Chinese consumers. The current mercantile practice was only for a temporary purpose because China lacked capital. But China doesn't lack capital anymore. The harm inflicted by hoarding US dollars isn't justified any more.

 

[Shotgunner51]

What makes you think trade wars won't lead to complete ban on trade ?

It could happen on the table, of course, very easy for politicians to make the call, but what's stopping people from trading in real world? For the sake of doing business, people irregard of nationalities can be very creative, haven't you seen China goods reaching US shores through 3rd country packaged in 3rd country labels? Business talks, BS walks, that's real world, if you're competitive you win, otherwise you loose.

 

[Shotgunner51]

I don't think China is winning by hoarding US dollars. It only imports inflation and hurts Chinese consumers. The current mercantile practice was only for a temporary purpose because China lacked capital. But China doesn't lack capital anymore. The harm inflicted by hoarding US dollars isn't justified any more.

China is winning in merchandise trade, but you're right cos that's only the beginning, the game is far from over yet. There are services trade, and then there are investment or financial which is the real game changer.

Yes China is hoarding too much dollars, as of 2021Q2 our reserve assets ($3.3459T) still account for as high as 37.06% of total international assets, though this ratio has dropped from above 50% at its peak, we are still far more vested than major creditor nations say Japan's 11.84% (2020Q4). We are actively pivoting to outbound FDI, in order to do so we have build a couple of SWF (sovereign welfare funds) following the successful path of Kuwait, Singapore, Norway etc, but we face severe hostility in cross-border M&A especially in the west, we can only progress gradually. Dollar hoarding is in fact a catch 22 situation for China, it needs to be carefully managed for the time being in order to keep currency exchange rate stable, but the roadmap is clear.

International Investment Position of Japan (End of 2020) : Ministry of Finance

www.mof.go.jp

http://www.safe.gov.cn/safe/zggjtztcb/index.html

 

[Paul2]

China is winning in merchandise trade, but you're right cos that's only the beginning, the game is far from over yet. There are services trade, and then there are investment or financial which is the real game changer.

Yes China is hoarding too much dollars, as of 2021Q2 our reserve assets ($3.3459T) still account for as high as 37.06% of total international assets, though this ratio has dropped from above 50% at its peak, we are still far more vested than major creditor nations say Japan's 11.84% (2020Q4). We are actively pivoting to outbound FDI, in order to do so we have build a couple of SWF (sovereign welfare funds) following the successful path of Kuwait, Singapore, Norway etc, but we face severe hostility in cross-border M&A especially in the west, we can only progress gradually. Dollar hoarding is in fact a catch 22 situation for China, it needs to be carefully managed for the time being in order to keep currency exchange rate stable, but the roadmap is clear.

International Investment Position of Japan (End of 2020) : Ministry of Finance

www.mof.go.jp

http://www.safe.gov.cn/safe/zggjtztcb/index.html

We know what to do with all these dollars. China is now world's no. 1 creditor. The matter is, we have just that many USD. We can't lend them all at anywhere close to the market rate. Nor we have enough good white collar workforce to administrate debtor compliance.

State funds can invest too, but honestly, most of these SOE scale investment projects for grabs in the developing world are just a dressing for embezzlement schemes of locals. And China has bad fund managers, all good ones went to live in the West. SOE investment funds have a record of 10 digit write-offs.

 

[Shotgunner51]

China is now world's no. 1 creditor.

Not yet, still second now (combined including HKSAR), but I expect overtaking Japan (you can see their central bank's international BoP data in above link) as 1st largest creditor a few more years down the road.

Nor we have enough good white collar workforce

True, we have world-class industrialists but our financial sector in mainland (excluding HKSAR which is world-class) is yet to catch up, our professionals have quite a long way to go to be frank. Like driving, it's not just about mastering skills to control the car, it's more about skills in dealing with roads and other wreckless drivers. Our financial pros are more inclined to be analytical, text-book, lack survival/combat skills crucial in real battlefields.

 

[nang2]

Not yet, still second now (combined including HKSAR), but I expect overtaking Japan (you can see their central bank's international BoP data in above link) as 1st largest creditor a few more years down the road.

True, we have world-class industrialists but our financial sector in mainland (excluding HKSAR which is world-class) is yet to catch up, our professionals have quite a long way to go to be frank.

Having a world-class industrialists is easier. It is difficult to fool with solid products. But for finance, it just requires a lot of trust, which isn't easy to come by from CCP.

 

[K_Bin_W]

Fed's balance sheet is never intended to absorb inflation. Fed prints money to buy US bonds. US government gets the money to buy US products/services. Inflation is ensued. Only the printed money held by international creditors is absorbing inflation so long as they only buy US bonds.

Spot on...

 

[Shotgunner51]

Having a world-class industrialists is easier. It is difficult to fool with solid products. But for finance, it just requires a lot of trust, which isn't easy to come by from CCP.

IMO the continental law legal system encourages discipline, which may be good for industrial development, but its rigid nature can't cope with the speed of innovation required for financial sector. Deals are like fingerprints, no two deals look exactly the same. In fact the most battle-hardened financial pros working in Shanghai/Beijing nowadays are those who have been working in Hong Kong, Singapore, London or New York, those who have experienced common law system. In retrospect now I can see the rationale when Beijing decided to segregate Bank of China International (BOCI) from BoC completely, the two are separated from the root above, obviously Beijing knew very well the shortcomings of mainland environment/practices with respect to financial sector. Financial sector of Hong Kong, as well as wealth management experiences offered by those traditional big families, are of instrumental value to China.