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China vs. The Dollar | Diana Choyleva

Bankless

NOTE

Capital Flows Reflect Investment Preferences

Dollars circulate out of the U.S. to developing countries, which then reinvest those dollars back into American capital markets. This dynamic highlights a friction faced by China, as its less developed capital markets stem from distinct cultural interpretations of capitalism compared to the U.S. China aims to attract investments from countries within its sphere of influence, yet many individuals from those countries prefer investing in assets aligned with democratic economies that uphold rule of law and property rights. Consequently, China maintains a closed capital account to contain these financial dynamics.

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