Money creation in China has gone bonkers. Authorities have opened the valves, and new credit is surging through money pipelines, including state-owned banks and the “shadow banking” system, and so loans in just the first two months this year soared by $1 trillion. Where did this money go?
We don’t know, but we’re getting indications that some of it is showing up right here in the US.
At the same time, “China is getting into the venture capital business in a big way. A really, really big way,” as Bloomberg put it: Government-backed venture funds raised about 1.5 trillion yuan ($231 billion) last year to bring the total to 2.2 trillion yuan. “That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally….”
While China is drowning in this sea of liquidity, its exports in February crashed 25% in dollar terms year over year. Part of it was due to the Chinese New Year effects. The rest was due to weakening global demand for Chinese goods: It was the 11th month of declines in 12 months.
Exports of goods are crashing, but hey, no problem, exports of money are booming. Capital flight takes on ever fancier dimensions: mansions in Southern California, tony condos in San Francisco, huge commercial and residential development projects, corporate acquisitions, and so on. Prices have surged for seven years and have reached ludicrous heights. So this is a good time to buy.