The mainstream views the RMB as a financial asset ripe for revaluation, but I argue it is essentially an 'Industrial Utility' designed to maintain global supply chain throughput. This is the underlying logic for why it refuses to appreciate. I break down this mechanism in my new piece, 'The Industrial Standard: Why the RMB is Backed by Factories, Not FX Reserves.' I’d love to hear your thoughts or pushback on this thesis.[https://substack.com/@chinarbitrageur/p-182745506]
Those are all valid points to consider, but those assets in China are hugely overvalued. The asset bubble still needs to be pricked and it will eventually happen.
I can see letting it deflate slowly, but I'm really not seeing any progress. To date, it is just letting some air out of housing and replacing it with more infrastructure and industrial assets.
The other thing that is being missed is that the outflow of Chinese investor money will be offset by Chinese banks no longer purchasing US debt. Would it offset exactly? Likely not, and I have no idea where things would settle, but it has to happen someday.
The mainstream views the RMB as a financial asset ripe for revaluation, but I argue it is essentially an 'Industrial Utility' designed to maintain global supply chain throughput. This is the underlying logic for why it refuses to appreciate. I break down this mechanism in my new piece, 'The Industrial Standard: Why the RMB is Backed by Factories, Not FX Reserves.' I’d love to hear your thoughts or pushback on this thesis.[https://substack.com/@chinarbitrageur/p-182745506]
Those are all valid points to consider, but those assets in China are hugely overvalued. The asset bubble still needs to be pricked and it will eventually happen.
I can see letting it deflate slowly, but I'm really not seeing any progress. To date, it is just letting some air out of housing and replacing it with more infrastructure and industrial assets.
The other thing that is being missed is that the outflow of Chinese investor money will be offset by Chinese banks no longer purchasing US debt. Would it offset exactly? Likely not, and I have no idea where things would settle, but it has to happen someday.