- Down to $3.5tn from $4tn in June 2014.
- Fall due to China supporting renminbi (i.e. buying renminbi and selling US$ when downward pressure on renminbi).
- Downward pressure on renminbi due to capital outflows as China economy slows and foreign investors leave.
- IMF now says no (after years of saying yes) because renminbi has gained 25% against the US$ over the last decade.
- US considers it "significantly undervalued" (saying China keeps it this way for trade advantage).
- China is the world's largest trading nation, and many attribute this to an artificially undervalued currency.
- Big depreciation of currency.
- Deep recession continues.
- Multi-year government stimulus program (aimed at prolonging a consumption & credit-led boom) has failed, and all that's left is a huge budget deficit.
- Produces 10m barrels per day, but consumes 25% of them.
- Believed that at current consumption rate, given reserves and estimated extraction potential, set to become a net oil importer by 2025/30.
- Hence government is making announcements about investing in solar and wind energy + the need to phase out fossil fuel use by 2050.
- Problem for Japan is that economy is looking better but still no signs of much-needed in inflation (big fear is for deflation coming back to spook the economy).
- Central bank (BoJ) recently saying economic outlook ok and signs some signs of inflation, so therefore monetary easing on hold.
- IMF warning recovery is weak hence 3 arrows of Abenomics should continue (and therefore monetary easing should continue).
- Consensus seemed to be rate rise for June.
- But now emerges growth was weaker 1Q15 than expected.
- Reduces likelihood of June rate rise.
- Record balance of payments deficit recorded 1Q15.
- China exports more than it imports, so usually has a large trade surplus.
- But funds being drawn out of the country exceed this.