Last month, Dalian Wanda, one of the most outward facing corporates in China, bought the organiser of the Ironman triathlons from a US private equity firm for $650 million.
Meanwhile, Anbang Insurance, another company with similar global aspirations, looked less likely to succeed in its courtship of the Portuguese authorities in the hope of purchasing the remnants of a troubled financial conglomerate in Lisbon – precisely because the Chinese already have purchased so many assets there. At the same time, Chinese tourists continue to flood destinations like Japan, purchasing luxury goods which have become ever more inexpensive as a result of the steady appreciation of the Chinese currency, with the intention to sell them back home for a tidy profit.
It is hard to know what represents prudent diversification and what constitutes capital flight on the part of Chinese groups and wealthy travellers. But for those who track capital outflows from China, the distinction does not much matter. In the four quarters to the end of June, such outflows, (which do not include debt repayment) have totalled more than $500 billion according to data from Citigroup. China’s mountain of foreign reserves, once around $4 trillion, are now down to less than $3.7 trillion and are expected to drop further to $3.3 trillion by the end of the year, Citi calculates.
Not long ago, it seems that the world was awash in cheap dollars. Many of those cheap dollars could be traced to the generous monetary policies of the Federal Reserve. But many of them also came from the mainland as Chinese recycled their dollar earnings from the sale of exports abroad. Chinese capital flowed into everything from farms in Africa to ports in Sri Lanka and Pakistan, to dairies in New Zealand, energy firms in Canada and Treasuries in the US.
This post was published at David Stockmans Contra Corner on September 7, 2015.
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