So I have been travelling to much and am currently enjoy a strenuous regimen of two a day umbrella drinks and naps on a south-east Asian beach. The battery is getting recharged and looking forward to writing more.
I wanted to put out something someone sent me about the rapidly shrinking payments gap. As you can see below, the difference between bank payments for imports and the customs reported imports has shrunk rapidly and dramatically.
Since the recent peak discrepancy number, of $58 billion in January and writing about it here in February when the discrepancy dropped slightly to $47 billion, the difference between bank payment for imports and customs reported imports have fallen dramatically. In August, this discrepancy was just above $10 billion USD.
The fall off in this discrepancy has been nothing short of stunning. The last time there was a single month this small was in September 2013 with periods of 2012 and 2013 matching some type of moving average. SAFE is clearly cracking down on moving money out of China this way.
Placed in larger context it gets even more interesting. First, this drop is responsible for essentially all of the supposed slow down in outflows from China. If this number returns to the pre-crack down average, outflows from China would be approaching $100 billion per month. Second, there is a game going on here which we can call whack a mole. Shutting this avenue down will only drive the money out other channels which we already see evidence of as other channels become more prominent. Third, this movement represents a structural outflow of capital. As I have noted before, this is not due to 25 bps in New York but rather a structural and likely quasi-permanent shift in the demand for foreign assets by Chinese citizens.
Interesting stuff now back to my pina colada.