Regions

Wealthy Chinese men are getting rid of their yuan despite IMF's endorsement

Close
December 15
8:20 PM 2015

Despite the International Monetary Fund recent inclusion of the yuan or Renminbi in their basket, rich Chinese men are selling their money for other currencies, because they know that China's economy continues to slow down.

Instead of selling other currencies to buy yuan, Forbes reported that international capital flow data shows wealthy Chinese are getting their money out of the country. This caused the yuan to drop this week to levels that are at a near five year low.

According to The Wall Street Journal, China reported Monday that its foreign exchange reserves went down by $87 billion last month. This is a big surprise to markets as it went up by $11 billion in the month before that. Now, the wealthy Chinese are figuring out how strong Beijing's commitment to stable yuan is. Its seems like the country's leaders would rather opt to have a slow depreciation than a big devaluation.

The IMF may not have seen this yet, but these wealthy Chinese know that the economic slowdown still continues. This is due to the very weak exports and investments, which are its two major drivers of growth. These factors will bring interest rates lower as the US Federal Reserve is expected to increase theirs on December 15 to 16.

Real Money reported that exports went down 6.8 percent last year, which is lower than the expected decline of only five percent. Meanwhile, imports dropped 8.7 percent, which is not as bad as the initially expected 12 percent slump.

This is both good news and bad news since a weak yuan will maintain China on its path to growth as it makes goods cheap, from clothes to electronics, as they get sold globally. Meanwhile, a strong yuan would rebalance the economy to better growth as it increases domestic consumption.

On another note, the pollution problem of the country is threatening its real estate, which is why wealthy Chinese are buying more US real estate, making them the new top buyers in that sector, replacing the Canadians.

© 2022 VCPOST, All rights reserved. Do not reproduce without permission.
Tags
Share

Comments

Join the Conversation

Subscribe to VCpost newsletter

Sign up for our Deals of the Day newsletter.
We will not spam you!

Real Time Analytics