Home > Development Economics, Interest Rates > China and the exodus of cash

China and the exodus of cash

Another very good video from PunkFT. As the Chinese economy starts to slowdown by its standards (even at 6% growth) the Chinese are sending their money overseas in search of safer investments. In doing this they are often violating currency controls which are there to keep money inside China. The housing market in many countries have been driven up by the flood of cash from China – Vancover, Sydney, Hong Kong, New York and Auckland. Chinese spent almost $30 billion on U.S. homes in 2015.

How will authorities stop the outflow? One way is to increase domestic interest rates to encourage people to deposit their money in local banks. However this impacts those Chinese companies that borrow money and could prompt some debt-laden companies into deleveraging. Worth a look and great animations.

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