泡网俱乐部

The Great Wall of Chinese liquidity
从 China financial markets 作者：Michael Pettis

There has been a great deal of excitement and press coverage about the supervisory cooperation agreement signed yesterday between the China Banking Regulatory Commission and the Securities and Exchange Commission, which allows Chinese banks to conduct QDII investments for their clients in the US. This is, I think, the fifth such agreement, following those in Hong Kong, the UK, Singapore, and Japan. Chinese funds have been able to invest in the US for several years now, but this agreement allows them to create and market investment products tied to US securities. There are 23 banks in China that have the license to make overseas investments for their clients under these rules.

According to today’s South China Morning Post, “The news will be welcomed by fund managers in New York waiting for the so-called ‘Great Wall of Chinese liquidity’ to hit US shores.” Several other newspaper accounts also referred to this great wall of liquidity that should wash into the US markets.

But I wouldn’t splash on the soap just yet. It might be a while before any serious money actually comes into the US. Even though plenty of Chinese have a fascination with things American, and investing in the US might seem like a great opportunity for them, these funds will still have to face a terrific headwind. They will probably need to earn anywhere from at least 12% to 14% just to match the returns their investors can get from leaving their money in local banks here in China, and the fiasco of recent QDII investments (see my March 26 entry) means that investors are likely to be cautious.

What’s more, I would urge any investor who was considering buying these newly-approved products to think very carefully before taking the plunge. If fund managers have to beat 12-14% just to break even, I would guess that there would a ferocious incentive on their part to gamble wildly. That means some of them might make very high returns that are comparable or better than what Chinese could earn by leaving their money in bank deposits, but at the risk of some pretty ugly performances. After all, already one of only four mutual fund QDII’s recently went into liquidation, after just a few months of operation in which it lost over half the value of its assets under management, and all the others are seriously underwater. That suggests that prudence is not at the top of the list of qualities these fund managers seek to exhibit.

In the long run it is a good thing that Chinese capital markets are being liberalized, but by now I think most of us would have to agree that there will be no wall of money leaving China until there is a significant change on RMB expectations. In fact I have a sneaking feeling that the wall of money will materialize precisely when the local authorities are trying to stave off hot money outflows. Still, with reserves at over $1.6 trillion, and looking like they will easily approach or exceed $2 trillion by year end, I think it will be a long time before hot money outflows are a problem.链接

• 相关回复