Is China Running Out of Money?

We are the envy of the world, with $20 trillion in debt and a limitless credit line, thanks to currency reserve status. On the other hand, cash rich nations like Saudi Arabia ($600 bill) and China ($3.3 trill) appear to be burning cash at an alarming rate, causing people to question their policies, just a little.

The drop in the nation’s foreign reserves over 2015 was the first since 1992, ending a 22-year ascent that began under former top leader Deng Xiaoping in an effort to keep a floor under the tumbling yuan. They fell by $108 billion in December alone.

“Where is the line in the sand, and what happens when we get there?,” said Charlene Chu, the former Fitch Ratings Ltd. analyst known for her warnings over China’s debt risks and now a partner of Autonomous Research Asia Ltd. “China’s large hoard of foreign reserves gives the country considerable power and influence globally, and I would think they would want to protect that. If there is such a line in the sand, it is very possible we hit it in 2016.”

China burned through $500 bill last year. At that burn rate, they’ll be in the streets, destitute, in exactly 6 years. More than that, however, many of their investments are illiquid and the hard line in the sand, according to analysts, is $2 trillion. They have $1.25 trillion in U.S. Treasuries and the rest is tied up in complete shit.

Should their cash dwindle into the 2’s, they might be greeted with a sundry of credit downgrades, thrusting the great counterfeit giant into a whole new world of pain and misery.