Arthur Hayes Discusses China Capital Flight's Potential Impact on the Macro Landscape – How Might It Influence Bitcoin?

Monitoring the Potential Capital Flight from China is a Crucial Trend, Advises Arthur Hayes, the Controversial BitMEX Founder and Cryptocurrency Veteran.

Google Finance data reveals that the Chinese yuan (CNY) has experienced a notable depreciation of over 5% against the US dollar since the inception of 2023.

Arthur Hayes, addressing his substantial following of 394,100 users on the X social media platform, shares insights from his conversation with Andrew Collier, a distinguished China analyst serving as the Managing Director of Orient Capital Research. They discussed the potential for Chinese capital flight.

Reportedly, Collier suggests that an effective method to gauge this trend is by assessing the disparity between China's net export earnings (calculated as export earnings minus import expenses) and the nation's foreign exchange reserves (the stockpile of foreign currency reserves held by China's central bank).

Based on Bloomberg data, China's foreign exchange reserves have augmented by approximately $32 billion since the outset of 2023. Data sourced from Trading Economics indicates that China's year-to-date trade surplus stands at approximately $553 billion.

Hayes deduces that approximately $520 billion has left China for various purposes, presenting several possibilities:

  1. China might be significantly increasing its gold holdings.
  2. China could be allocating funds to retire offshore USD-denominated debts of its banks and corporations.
  3. There is a chance that affluent individuals from China are emigrating.

Crucially, China appears not to be increasing its holdings of US Treasuries.

Hayes emphasizes the significance of this capital flow, particularly in light of the weakening Japanese yen (JPY). He explains that as long as the JPY remains weak, the CNY must depreciate to maintain the competitiveness of Chinese exports against Japan. He anticipates that this capital movement will persist and possibly increase in magnitude. In closing, he expresses hope that some of these funds may find their way into Bitcoin (BTC) and Satoshi's domain.

Source: Arthur Hayes

Sep 22, 2023

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