Data on Chinese US Balance of Payments

I used simplified numbers when we first thought about
how the Chinese government intervened
in foreign currency markets to keep their currency devalued.
What I want to do in this video is
to look at some of the real numbers.
So this is from the US bureau economic analysis bea.gov.
This is the url where I actually got these data.
This right over here is the US balance of payments relative to China.
This part right over here is the current account,
which just really tells us the imports versus exports.
And this over here is the capital account
sometimes called financial account
depending on how you are accounting for it.
And this is telling us about
the inflow or the outflow of ownership of assets.
So this is goods. This is assets.
You can think of it as money or securities or other things like that.
Now you can look from 2006.
In 2006 we did export something to China 72 billion worth.
In 2006 this is in millions of dollars.
So 72 thousand is 72 billion increased to 85 billion,
95 billion stayed at around 95 billion in 2009.
But the United States imported a ton more 330 billion.
330 billions in 2006. 380 billions in 2007.
Almost 400 billions in 2008.
So we running almost 300 billion trade deficit in 2008 relative to China.
And in 2009, it goes down a little bit.
This looks like about 260 billion trade deficit.
So that’s really because we United States imported fewer goods.
To a large degree, that’s probably because of the US recession
where consumption in general slowed down.
So we would bought fewer goods and services
from pretty much anyone including ourselves or China.
Now you can see that being offset in the financial account.
This, to some degree, tells us the story.
But it doesn't give us full story of the Chinese.
This is just the Chinese government.
This is all Chinese ownership.
But they are increasing their ownership of US assets.
Those assets they could be US treasuries, notes and bills.
These could be US stocks. These could be US real estate.
But you can see each year this is the increase.
Americans are buying assets in China
5 billion dollars in 2006, 2 billions in 2007,
12 billions in 2008, 18 billions in 2009.
To some degree, this is limited by
restrictions imposed by the Chinese government.
As you can see Chinese are buying way more assets in the US.
This is really kind of that picture of the Chinese
especially the Chinese central government
is buying US assets to do that.
They have to buy dollars with Yuan
which keeps the dollars strong
and it allows their currency stay weak,
which, to some degree or to a large degree,
allows the balance of this trade deficit to stay where it is.
Now I'll leave you with one conundrum.
To a large degree, this is, these numbers right here,
they are offsetting the trade deficit, especially in 2008.
The Chinese bought way more US assets than
actually even the trade deficit they more than made up for it.
But in 2009 you don't see them buy enough
to make up for the trade deficit.
They bought 143 billons and actually on a net basis
it would probably be about 120 something billion,
which doesn’t make up for the whole 260 billion,
so how did they still keep their currency pegged.
And the answer we are going to look in more detail
is they don't have to directly buy US assets.
They could buy assets or
they could buy currency from another country.
That will put upward pressure on that currency.
Let me report it over here.
China could go and buy US currency or
it could go to another country and buy their currency.
Country A is going to feel pressure.
Its currency is going to go up in value.
And it doesn't want that, because it will hurt its trade.
So it might go and buy US assets to keep it devalued.
That would not show up in that chart.
We will look into that in the next video.
This is Salman Khan of the Khan Academy for CNBC.