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...

UKRAINE FLIRTS WITH DEFAULT

Following the pattern we have identified in other countries in the region, Ukraine is once more getting itself into a deeper and deeper mess.  Part of the problem is political, part of it is economic, and part is a combination of the two.  Moreover, Ukraine has one of...

The Slowdown in China Takes a Turn for the Worse

The market has recently taken relief from the decision by China to lower the reserve requirement ratio (RRR) as well as the signal that it will be the first of a series of cuts. Monetary easing in China, the notion goes, is bullish for risky assets. This is certainly...