Why Do Chinese Banks Need More Dollars?

china dollar shortage

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Hmmm, interesting question so let’s uncover some interesting facts about the economy and Chinese banks. Many continue to declare that the dollar will die and that the Yuan will emerge as the “reserve currency” of the world. Well, no. There are so many debts and obligations denominated in dollars that for this to occur you’ll need to wake the world up when there are no more dollar obligations to be paid by individuals, businesses, or governments. Until then, there is always demand for dollars.

Until 2017ish banks in China had dollar surpluses. Their dollar assets exceeded their dollar liabilities. Since then and through the end of 2018 this has completely changed. Chinese banks have dollar denominated liabilities far in excess of assets. What this means is that bills and obligation that need to be paid in dollars are just that – in need of dollars to pay them.

Check out this piece from ZeroHedge.com for more.

The more capital controls they throw down, the more Chinese worry about the value of the Yuan and protecting their wealth. Bitcoin anyone?

Here is another update on the interbank lending market freezing up and causing repo rates to soar to ridiculous levels.

In September of 2019 things started to deteriorate further. China was in effect begging foreigners to invest in China, and this is after constantly declaring how China and the Yuan was the global economic superpower. Some analysts and investors looked at this as a desperate move by China.

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