China has banked an inordinate amount of U.S. dollars in the last couple of months as trade surpluses and inflows flow into its bond market. The Chinese trade surplus through September was about $100 billion larger than its 5 year average preceding the pandemic. This current account will provide a buffer against any foreign debt problems regardless of any economic situations China faces this year. The current account surplus could allow China to deleverage its corporate debt market, particularly in real estate, which has faced a difficult bond market. China’s dollar holdings have allowed the yuan to appreciate like other emerging market currencies, such as in Russia and Columbia. Holding greenbacks is a bet on a growing U.S. Economy, and could help China hedge their slower growth.

FINSUM: The large current surplus could mean myriad things for China, but it could also just be another symptom of the global economic disruption due to Covid-19.