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Has the central bank of China been secretly printing money? Implicatns for emergng real estate mkts?

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  • Has the central bank of China been secretly printing money? Implicatns for emergng real estate mkts?

    Unlike the US and the EU, there's no need to go through congress or parliament for money to be printed, just one phone call from the politburo to the central bank governor is enough.

    We've read some articles that says China has stopped purchasing US debt (US dollar) for almost a year, as less dollar flow into China due to US recession - perhaps C1ue can elaborate on this.

    Since the US is busily printing money, the RMB should rise if the Chinese government stopped buying US dollars (and sell RMB). But the RMB did not rise, and is at parity with the dollar (even falling against many Asian currencies and the Euro). Such a situation can occur if China is printing huge quantities of RMB though bank loans, depressing the RMB. If this is true, China banks have lent out a few trillion yuan in new bank loans, much of which has gone into property, stock and commodity markets.

    If the US Fed starts withdrawing liquidity from the market and raising rates, China may have to recall the bank loans if the huge liquidity would make the RMB depreciate against the dollar - a political embarrassing situation that must not happen, particularly so when the US and Europe is asking China to let the RMB appreciate.

    So a rising US interest rate may create a double whammy for Asian markets. First, a rising interest rate may mean higher holding costs for speculators, Second, as China banks withdraw credit, Chinese state companies that used bank overdraft to speculate will now have to dump their property purchases financed (probably illegally) using state bank loans. Individuals tight on credit will also be affected.

    We've know what will happen to the market when banks stop lending out money to home buyers, but have we seen what happens when banks start canceling loans that went into real estate?


    Disclaimer - I'm no economist grad or expert, this is my simplistic view, please correct me if I'm wrong.
    Last edited by touchring; 02-21-10, 03:08 AM.

  • #2
    Re: Has the central bank of China been secretly printing money? Implicatns for emergng real estate m

    several things:

    1) china has no stopped buying treasuries. that is a lie. rolling != stopped buying.
    2) PBoC is out of control: M2 increased by 33%+ YoY - publicly.

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    • #3
      Re: Has the central bank of China been secretly printing money? Implicatns for emergng real estate m

      Originally posted by phirang View Post
      several things:

      1) china has no stopped buying treasuries. that is a lie. rolling != stopped buying.
      2) PBoC is out of control: M2 increased by 33%+ YoY - publicly.
      Indeed... and the much talked about so-called drop in credit being issued in China boils down to only slowing the credit creation rate by about 10-15% (from a 30% annual growth rate to 25-27%).
      CONfidence, anyone... :mad:




      And speaking of "secretly" doing things with money, here's a chart I've been maintaining for years. The data is from the IMF and is part of the picture of total reserves of central banks & governments from a data series called COFER (Currency Composition of Official Foreign Exchange Reserves).





      In other words, over 40% of the reserves are in areas that are not being divulged publicly.






      Just for perspective, here's a few other charts from COFER.










      http://www.NowAndTheFuture.com

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      • #4
        Re: Has the central bank of China been secretly printing money? Implicatns for emergng real estate m

        Just was catching up on my blogs - saw this at Jesse's. Perhaps this is relevant to the discussion:

        Citi: China Sold Their Treasuries Because They Want To Buy Tons Of Gold

        http://www.businessinsider.com/citi-...or-gold-2010-2

        apologies if this was already posted.
        SW
        If necessity is the mother of invention, desperation is the father...

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        • #5
          Re: Has the central bank of China been secretly printing money? Implicatns for emergng real estate m

          Originally posted by phirang View Post
          several things:

          1) china has no stopped buying treasuries. that is a lie. rolling != stopped buying.
          2) PBoC is out of control: M2 increased by 33%+ YoY - publicly.

          Ok, I meant China stopped increasing their treasuries holdings.

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          • #6
            Re: Has the central bank of China been secretly printing money? Implicatns for emergng real estate m

            http://www.NowAndTheFuture.com

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            • #7
              Re: Has the central bank of China been secretly printing money? Implicatns for emergng real estate m

              Originally posted by bart View Post
              WOW. Very eye-opening.

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