China's HUGE Trade Surpluses Mask Capital Outflows [Eurodollar University, Ep. 185]

China's 2021 trade surpluses were gigantic, so why isn't the yuan surging too? We review China's 2014-21 trade and currency experience from the perspective of the eurodollar, the international reserve currency that once intermediated trade but now intermediates capital.

------EP. 185 TOPICS------
00:00 INTRO: Capital flows drive trade, not vice versa. A review of the Chinese trade surplus.
03:39 The eurodollar created itself to finance, intermediate trade; to solve Triffin's Paradox.
06:12 The eurodollar transitioned from focusing on financing trade to intermediating finance.
09:10 The eurodollar created itself offshore (jurisdictions with light-touch regulation).
11:17 Is a US trade deficit necessary for the eurodollar network to create US dollars?
15:13 China's recent trade surplus has been surging suggesting intense eurodollar inflows.
17:12 In 2014-16 China's trade surplus accelerated but the CNY lost value (E$ outflows?).
19:30 In 2017-18 China's trade surplus was stable but the CNY surged in value (E$ inflows?).
20:58 In 2018-19 China's trade surplus slowed but the CNY collapsed in value (E$ outflows?).
22:45 In 2020 China's trade surplus surged and its currency surged in value (E$ inflows?).
23:47 In 2021 China's trade surplus surged but its currency slowed in value (E$ outflows?).
25:44 OUTRO: If China's eurodollar outflow continues it'll weigh on the global economy.

----EP. 185 REFERENCES----
China’s Total Dollar Equation: CNY minus Trade Flows equals Some Sense of the Euro$ Problem?: https://bit.ly/33fLy1C
Alhambra Investments Blog: https://bit.ly/2VIC2wWlin
RealClear Markets Essays: https://bit.ly/38tL5a7

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---------THE TEAM---------
Jeff Snider, Head of Global Investment Research for Alhambra Investments. Master of ceremonies, Emil Kalinowski. Illustrations by David Parkins. Audio and video editor, Terence. Episode intro/outro music is CABO by Superintendent McCupcakes from Epidemic Sound.

------FIND THE TEAM-------
Jeff: https://twitter.com/JeffSnider_AIP
Jeff: https://alhambrapartners.com/author/jsnider/

Emil: https://twitter.com/EmilKalinowski
Emil: https://www.EuroDollarEnterprises.com

David: https://DavidParkins.com/
Terence: https://www.VisualFocusMedia.com