Posted on 10/07/2019 5:21:37 AM PDT by BeauBo
Chinas major commercial banks have a funding issue outside Beijings control: Theyre running low on the U.S. dollars they need for activities both at home and abroad.
The combined dollar liabilities at the big four commercial banks exceeded their dollar assets at the end of 2018, their annual results showa sharp reversal from just a few years ago. Back in 2013, the four together had around $125 billion more dollar assets than liabilities, but now they owe more dollars to creditors and customers than are owed to them.
Bank of China is by far the greatest contributor to the shift. Once the holder of more net assets in dollars than any other Chinese lender, it ended 2018 owing about $70 billion more in dollar liabilities than it booked in dollar assets.
(Excerpt) Read more at wsj.com ...
“The Fed is extending its overnight repo program for another month... This points to a liquidity problem in the market”
Demand is high for US dollars, as other major bond options have cut their interest rates (some to zero, or even negative), and as other major economies face a more recessionary outlook. Not enough dollars in supply for all those looking to get in.
Time for the Fed to increase liquidity.
China can go back to a survival mode, can the West?
China is already in a slowdown that cannot likely be reversed. They have an aging population due to the one child law. Unlike America China got old before they got rich. They invested a huge amount of their wealth building ghost cities that are sitting empty and deteriorating. There is no country in the world that can go head to head with the US on a level field.
If the Chinese divest themselves of the $1.2 trillion or so of US treasuries where will they invest? $1.2 trillion is a drop in the bucket of our debt.
Manufacturers are fleeing china right now to return to the US and places like viet nam. So now we will buy from viet nam. It will not destroy the US. We have 70% personal consumption in this country.
Hong Kong has become the test case of how much pain China will absorb to have total control. Hong Kong is the important financial channel for China. This is worth watching, I think it will show Chinas policy to deal with problems.
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