The turmoil in China continues. The recent trade data caught many off guard, coming in as it did at six year lows. The recent announcement it would be closing many steel plants, up to 60% in one area by 2020. The fate of the yuan. Will they try one last ditch effort to muddle through or let it fall are both concerns. The recent crackdown on businesses to prevent the ongoing flight of capital is another, proving that capital flight, notwithstanding what many so-called pundits claimed was overstated, is a growing problem.
It may indeed have slowed, but as a story earlier today from Business Insider shows necessity and invention are still alive and doing quite well. Last year according to some reports around $700 billion to $1 trillion fled the country.
Capital has been flowing out of China at unprecedented rate over the past six months. Amidst concerns about the economy and the potential for further weakness in the Chinese renminbi, many investors are running for the exits.
With regulators closely monitoring cross boarder flows, heightening the risk of more stringent capital controls being put in place, investors have become increasingly inventive when it comes to getting money out of China.
Take the practice of fake invoicing, for example.
Based on recent anomalies between Chinese and Hong Kong trade figures, it appears many investors are now trying to get their capital out through non-traditional means, overstating the value of imported goods from Hong Kong to circumvent Chinese capital controls.
It’s the exact opposite scenario to what was seen in past years where firms in Hong Kong were overstating the value of imported goods from China in order to get capital in there, avoiding capital controls in an attempt to speculate on further strengthening in the renminbi.
Just two of the problems China face is the slowdown of growth and market turmoil. Like we always say volatility is a two-way street. It can be your friend or your nemesis. Volatility always brings out the financial vultures. Unless there's some kind of dramatic change, the Chinese government can expect more of the same.
Just two of the problems China face is the slowdown of growth and market turmoil. Like we always say volatility is a two-way street. It can be your friend or your nemesis. Volatility always brings out the financial vultures. Unless there's some kind of dramatic change, the Chinese government can expect more of the same.
theepochtimes.com/n3/1986351-the-good-the-bad-and-the-ugly-scenarios-for-china's-economy
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