On Wednesday, investor Kyle Bass revealed that China’s foreign reserves reached a critically low level. The suggestion has intensified an actual debate over the country’s probably inability to keep its national currency from falling.
Kyle Bass, whose Capital Management LP boasts a multibillion-dollar wager that the Yuan as well as Hong Kong dollar are going to sag, informed his clients in a letter that his company suggests China’s foreign reserves are about $2.2 trillion, compared to the $3.23 trillion officially reported by the country’s central bank by the end of January.
The comments from the Dallas hedge-fund manager illustrate mounting investor unease regarding the extent to which the official country’s number reflects reserves China can utilize for propping up the value of its currency.
In his letter, Bass told that some of China’s foreign reserves are firmly tied up in certain institutions, including policy banks, not to mention one of the country’s sovereign-wealth funds.
The point of view that China boasts years of reserves to burn through isn’t true, to put it mildly, as Bass states in his letter. The matter is that China’s back is absolutely against the wall these days and that’s one of the most crucial reasons why the Chinese government is extremely sensitive to any comments, concerning its reserve levels and a hard landing.