Thanks Alan. An interesting read.
What I've not been able to understand is where China’s massive FX reserves come from: circa US$1.6T.
The bottom paragraph here is interesting. I’ve had no-one explain well what has facilitated China's massive accumulation of FX reserves (other than via massive trade surpluses).
Government manipulation of the currency implies somewhat of a substantial reliance on export income.
But this article says that exports are not a key driver of fixed investments in China.
The question is, are the figures accurate?
Pushing the question a step further, and assuming for a minute that export income is not the primary source of capital for fixed investments, what is funding the private savings?
The savings pool must come from somewhere.
If its Government, where did the Government get its money, given that its currently a net lender as I understand things?
My point is, that if the Chinese economy is export reliant, then by necessity we will see a fair backing off in China as Europe and the US go into recession in the absence of the Chinese tapping into their now substantial savings pool to drive the continued industrialisation.
If it's not export reliant, where have these huge trade surpluses been coming from: around US$50B a month?
BUSH
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