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“The only thing that could protect Beijing from this incoming wave is a significant increase in exchange-rate flexibility. Today” Stephen Green, Standard Chartered |
As Green tried to rationalize the factors behind the outflow, he concluded that the initial estimate was likely to have been too large. And while he said there was a possibility that the country was experiencing some hot outflows, the most likely reason was trade financing.
Green says that the most recent data from the US Treasury, released on January 16, show that China is still a net buyer of US dollar-denominated assets.
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