Kyle Bass On: China’s Current Account Deficit | Interview | Real Vision™

Описание

Legendary investor Kyle Bass, the founder of Hayman Capital, joins Real Vision’s Grant Williams for a deep dive into China. From shifting capital flows around the world to the threat of China devaluing the yuan, these two discuss threats and opportunities that China presents investors now. Filmed September 17, 2018 in New York.
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Kyle Bass On: China’s Current Account Deficit | Interview | Real Vision™
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Transcript:
the most interesting thing, when you really look down at the numbers is their current account's gone negative for the first time since 2001. All right, so it's really 17 years since it's been negative, and the first half of this year, it's negative. And there are a few reasons why, the travel services deficit, getting the $320 billion, and the second thing when you look at their current account is they're such a massive net importer of energy.
Sure.
So you look at energy. If you remember end of 2014 when crude oil collapsed from 100 down to 35, and iron ore the base metals went with it, that gave China a huge reprieve. Their current account was right at 0 at the end of 2014, and that it bounced back up into the low single digits, because all of a sudden their raw materials costs collapse. So what's interesting is the net volume of crude oil that they import has gone up 45% in four years.
And now what's the price doing? It's turning.
Yeah.
So the price of crude has gone from mid 30s to call it 70, and the same for our base metals, iron ore, and lot of the inputs that they have. So when you look at their current account, this is not an aberration, right, and the reason they're fighting so hard on trade is while they run a big trade surplus with the US, they run trade deficits with everyone else everywhere else. And so they run a $400 billion trade surplus with the US, and their current account's negative.
Yeah.
Right? And what we're doing is putting some tariffs and trying to at least level the playing field on unfair trade practices. And that's why they're really pushing back so hard, because they're out of dollars. So they are desperately short dollars, and now their current account's negative. And so when you think about this fallacy of China can have its cake and eat it too forever, I think we all know that that can't happen.
And what we're seeing now is all the preconditions are set forth for pretty material devaluation.