Sidelined: US-China Investment in 1H 2019

US-China tensions further escalated in the first half of 2019, amplifying political risk for investors. Both sides ratcheted up bilateral tariffs following the breakdown of trade talks in May. The Trump administration then raised the stakes further by placing Huawei on the “Entity List”, restricting the ability of US suppliers to do business with the Chinese firm. China reciprocated, announcing to create an “Unreliable Entities” list of its own.

Posted August 1, 2019
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What Happened to China’s Current Account Surplus?

Balance of payments data from the State Administration of Foreign Exchange (SAFE) last week reported a sharp decline in China’s current account surplus, from $74.2 billion in Q3 2016 to only $11.8 billion in Q4. SAFE attributed this change to revised estimates of earnings from foreign companies, which were not repatriated, most likely because of newly imposed capital controls. The data adjustment therefore indirectly boosted foreign direct investment inflows as these profits were reinvested in China. The bottom line is that despite SAFE’s adjustments, China is still posting strong goods surpluses and larger services trade deficits, while foreign investment flows into China are still weakening.

Posted August 1, 2017
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1Q Balance of Payments: Stop the Bleeding

In 1Q 2017 the net deficit in the financial account and unexplained channels dropped to just $21.5 billion, signaling a pause to the period of dramatic capital outflows that started in 2Q 2014. As a result, China’s stated levels of FX reserves were nearly unchanged in 1Q 2017 after a mere $2.6 billion net sale. The stabilization of China’s external capital flows was a result of tighter capital controls as well as changing USD/CNY sentiment.

Posted August 1, 2017
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