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Good Time to Buy Chinese Currency: Follow the 'Hot Money'

Michael Pettis wrote earlier about where the "hot money" went. It could not go into the stock market because it was halved in seven months. The hot money could not go into local real estate market because housing prices everywhere in China except Shanghai has been going down for the past eight months. The inflow of money if calculated correctly went to the "underground finance companies" which loan out money at 5% per month.

For those who live in China please check with your local business pals. I live in Guangzhou and their answers lead me to believe it is impossible for local small businesses to borrow from local banks. To obtain the funding they must borrow from "underground finance companies" which in the US would be called loan sharks.

Who is to blame? Naturally the Chinese government who set up those ridiculous capital control mechanisms. While the government complains about the amount of inflow of foreign capital do you know that I can not wire out the "foreign capital"? Once the foreign capital arrives and even if the money moves to a CD it cannot be converted back into foreign currencies and to be wired out.