Chinese Financial Markets Liberalisation

http://www.nuwireinvestor.com/articles/how-the-new-yuan-carry-trade-will-impact-investors-52962.aspx

Hat tip NuWire Investor blog.

An incredible look at the future of debt markets as China approve issuance of USD denominated bonds. Implications are huge but little noticed by non-Chinese analysts/ press:

- Realise Chinese ambitions of taking over assets outside China. Thoughts are on the Japanese shopping spree in the US in the 80'ies.
- The Chinese have an overt intention of acquiring minerals and basic resources and are already well underway. This is to avoid production bottlenecks when economic growth returns to trend again and supply becomes restrained as it was in 2007/2008. Some also speculate China is acquiring commodities because they want to diversify away from USD and are concerned US QE efforts is increasing inflation and thus erodes the value of their FX holdings. A USD denominated bond will accelerate this trend and the opening up of Chinese financial markets is a huge positive for commodities.
- Bearish gold as Chinese funding in USD validates USD as reserve currency and could actually end up leading to demand for USD.
- Serves to diversify the burden of excessive USD reliance in Chinese FX reserves.
- Shifts balance of power even further to the east and away from Wall Street and DC...