
China Estimates Largest Capital Outflow in More Than a Decade in 2014 - fown9
http://www.wsj.com/articles/china-estimates-largest-capital-outflow-in-more-than-a-decade-in-final-quarter-2014-1422964754
======
sandworm
I know where it's going. My neighbourhood in Vancouver BC is covered in "for
sale" signs. There are minivans full of Chinese investors paroling the
sidestreets looking for houses.

The downside is that, by my count, more than half of the houses are vacant or
under construction. I smell bubble.

~~~
hnnewguy
> _I smell bubble._

Canada is one of the last-men-standing as far as housing bubbles. Toronto is
also bad. Calgary is heading for trouble now that oil has crashed. It could
get interesting.

~~~
jusben1369
Australia and Canada are very similar. Both continued with a housing bubble
well after all other Western markets collapsed. Both also supplied the raw
materials that fuel China's economy; an economy that didn't slow down very
much while the rest of the West suffered. But now they're clearly takings some
of the heat out of their economy. Australia and Canada will feel that.

~~~
curiously
but just when will this bubble burst and are there any metrics or signs we can
find that have suggested the bursting of subprime mortgage debts in 2008?

~~~
adventured
China's bubble has already burst. Their real estate market will continue to
fall indefinitely. Their record debt accumulation will continue until they
burst at the seams, while they try to keep the fake growth going.

Australia will trend down with China's weakening demand for resources. They're
directly pegged to China's well being.

Canada will trend down (or up) with oil. If oil is $30-$60, Canada will have
to tighten their belts. If oil is $60 to $100, all will be well, mostly.

That said, Canada's ability to binge on debt is likely nearing an end
(including mortgage debt). Their household debt has continued to soar post
great recession. Given where it's at now, there isn't likely a lot of runway
left. 1-3 years tops. As the debt binge ends, the housing market will lose a
lot of support. The only question will be whether it'll be an orderly decline,
or a crash; and I think that will depend on how much higher that household
debt level goes over the next ~36 months.

[http://www.theglobeandmail.com/globe-investor/personal-
finan...](http://www.theglobeandmail.com/globe-investor/personal-
finance/household-finances/canadian-household-debt-rises-to-record-
level/article22082881/)

The Canada vs US household debt chart paints the picture rather starkly:

[http://i.imgur.com/HCp5Gs1.png](http://i.imgur.com/HCp5Gs1.png)

~~~
curiously
The typical vancouverite response (annoying) is

"oh but our prices will never fall, we live on the best god damn city in the
planet, just look at all this foreign demand for our real estate, we are in a
bubble you say, you eggheads have been crying about it for the past 15 years
and look it hasn't happened so it never will, _this time it 's different_"

"this time it's different" \- japanese real estate bubble.

"we are in a new economy" \- dot com bubble

"samsung now makes cars" \- asian financial crisis

"these people will pay us back" \- subprime mortgage crisis

"oil will never fall" \- oil drop

"bitcoin is gonna keep going up" \- 2013

~~~
sandworm
And how's the weather where you are?

I took my dog to the dog beach this morning. Sunny and 12* ABOVE. We had one
day of snow this year. And the "wet coast" is really a myth. Seattle gets
rain, but Vancouver is tucked behind Vancouver Island and is much drier.

In all seriousness, the real estate market is driven by people with money, the
investor class. They are older and do not necessarily work, or they work
internationally and can park their families anywhere they want. So Vancouver,
being Canadian but without Canadian winters, is something different. I think
Toronto will burst long before Vancouver.

~~~
jbarham
> And the "wet coast" is really a myth.

Nice try but Vancouver really is wet and miserable most days in winter. I know
because I lived there for 5 years. Sure winter is more bearable than Halifax
or St John's but that's not saying much.

Now I live in Melbourne and just laugh and point to the banana tree in my
backyard when people complain about winter here.

~~~
Jack000
if we're going with the Chinese investors are inflating real estate prices
theory - most Chinese people would probably find the cold winters in the rest
of Canada a deal breaker, whereas the rain in Vancouver is a mild
inconvenience. If you don't want to go to the US, Vancouver Canada and
Australia are at the top of the list - Vancouver doubly so because of the
large native Chinese population.

Personally I think the foreign investment segment in the Vancouver real estate
market is a bit over-reported. A large part of the demand here comes from
East-Asian immigrants (30% of the population) who will buy a home despite
renting being a better fiscal option. This is reflected in the gap between
ownership and rental prices.

------
mc32
This a problem in first tier cities even in the US. It's not only the IPO
crowd driving up prices in SF, NYC, etc. But these foreign investors --the IPO
people get the flack from displaced communities, but foreign investment
contributes its own good share of this new housing shortage... It's begun to
affect second tier cities like Minneapolis, Austin, etc.

~~~
mikecuesta
Try living in a city like Miami where a staggering amount of condos/property
are primarily treated as a store of value by foreigners.

~~~
mc32
Sorry, but I agree, this is being felt by all first tier cities, like Miami,
as well as second tier metros.

------
randomname2
"Mr. Tao informed the audience that the capital flight from China in December
alone amounted to $20 billion, and that was just from official channels. The
true amount could be four times greater."

So this bureaucrat just committed career suicide by admitting this.

~~~
dualogy
Not really, think again.

China needs to convert their $4T into "real value" sooner or later. Rather
sooner. Various official statements over the last year indicated as much:
"after decades of accumulating dollars and treasuries, we have concluded that
it would be wiser to reverse course and start spending them".

This presents them with two problems, the danger of being accused of dumping
dollars (aka of agressive currency warfare), and the risk that doing so too
much, too fast could crash the value of their remaining holdings when
"financial markets" see what you're up to.

Much better to let your 1.3 billion people do the job: seemingly-inadvertently
"encourage" capital flight and replace any too many "capital outflows" with
your reserves. Your folks buy up assets all over the world and officials have
the excuse of an emergency situation that justifies "using our reserves that
were always meant for a rainy day just like this".

Just a wild little theory of mine. Take it or leave it ;D

~~~
thatsjustcrazy
Interesting speculation. Anecdotally, I've heard that in some H1B situations
where real estate is purchased, a % of the sale price is given back to the
Chinese government.

------
rrggrr
So what? Of course China's capital outflows were huge in 2014 - so was its
current account surplus. When China takes in huge amounts of foreign currency
for its exports it must recycle those funds - which flow out of the country -
particularly if it insists on intervening in the value of its currency
(keeping it from increasing and therefore subsidizing exports). So, huge
capital outflows for China doesn't necessarily mean a China-driven housing or
asset bubble. It does mean the European Central Bank and Federal Reserve
should have no problem continuing to sell paper.

------
eyeareque
I wish HN would ban paywalled article links.

~~~
vonklaus
I also think that would make sense. Paywalling is a legitimate business
strategy amd I don't fault these companies for wanting to get paid for content
creation. However, HN is an aggregator so many people can't view an article
like this. If a paywall article is posted, it would be nice to have a link to
a plain text version or alternate link. I think this would be a good
compromise.

~~~
tzakrajs
Isn't your good compromise just US Copyright violation by another name?

~~~
droopyEyelids
Not really, many online publishers allow direct access to shared links as an
enticement to potential subscribers, it's like turning your reader base into
your sales force.

~~~
tzakrajs
I never knew this, cool! I think HN mods should negotiate some sort of deal so
the links can be non-paywalled if you are coming through news.ycombinator.com.

------
quarterwave
I am reading this book 'The Dollar Trap: How the US dollar tightened its grip
on global finance' [1], where economist Eswar Prasad explains how money flows
into the US from around the world even when troubles originate in U.S
financial markets.

[1] [http://thedollartrap.com/](http://thedollartrap.com/)

------
__Joker
Apart from investing in real estate abroad, last year, Chinese folks were
buying huge amounts of bitcoins.

What is the reason, Chinese people trust their economy less than the western
economy ?

~~~
frankchn
Evading capital controls, perhaps? Since the Yuan is not fully convertible,
you can get USD from Yuan by using Bitcoin as an intermediary.

~~~
Canada
Chinese capital controls are easing. The country has a lot of cash and
continues to have a lot of income from exports. They're buying nice stuff and
taking luxury vacations. They're investing in foreign companies and property.
They can afford to, so why not? Were they supposed to just sit on the funds
forever?

