Short AUDCAD As Proxy China Trade

Although both AUD and CAD are commodity currencies, given Australia’s outsized exposure to China, AUDCAD can be used as a proxy trade on the Chinese economy. AUDCAD is approaching the top of its range just as Chinese liquidity is rolling over. In our March Leading...

Rising Inflation in China

PPI in China has swung from deflation to relatively high inflation over the last 6 months. Wholesale prices are rising fast, import prices are also rising due to the lagged effects from a weaker yuan are moving sharply higher. (CPI, especially core CPI, had been...

China: the Capital Leak Grows

A pivotal theme for 2017 will be capital outflows from China leading to contraction of domestic liquidity. Policymakers in China managed boost domestic liquidity earlier this year by state-directed lending, but there are signs capital is leaking out at an accelerating...

The Remorseless Logic of Capital Outflows from China

China is in the midst of a debt-deflationary bust.  It is an ongoing process that has gathered pace recently.  Capital outflows are a symptom of this, and a weaker yuan is an integral part of the attempted cure.  We expect more of this to come. We wrote back in the...

EM Money Growth Improving

Capital outflows from emerging markets continued into the second quarter of 2015.  Once again the outflows mainly emanated from China and from CEE and Russia.  The flipside is growth Treasuries held in custody for foreign accounts is stuck at zero percent.  This is a...

EM Capital Outflows Gather Pace

We discussed in April that global reserve assets had begun to fall on an annual basis.  This has continued, and the level of contraction is now as great as it has been since at least 2004. Capital flight from EM is gathering pace as growth slows and fear mounts over...

The Great Brick Wall of China

In this report we discuss the outlook of the Chinese economy across a number of key parameters: re-balancing the economy, the current account/exchange rate and the risks stemming from rapid credit expansion. The central thrust of our argument is that China will not...