Thank you for sharing, especially your concerns centered around government intervention in case things go south.
From my understanding, capital outflows seek higher returns in foreign markets which would eventually (in theory) be repatriated to drive eventual consumption. If the Yuan is strengthened, would this not make foreign produced goods cheaper to consume within the country? Would it truly be a "crash" if goods are consumed domestically instead of shipped to foreign countries? Considering the high savings rate, could these accelerated savings be used to purchase productive foreign assets?
My understanding from what I've read is that the capital outflows aren't just seeking higher returns in foreign markets. Instead, they are also seeking to protect that money from an expected economic collapse in China and lord knows what means of trying to claw that capital back by the government.
So I'm not sure a strengthening Yuan would necessarily remove the need for that reduction of risk.
That is my understanding as well. These aren't your typical international investments, the goal is to get the money out of China entirely.
Worth noting, China is also trying to limit international investments (in addition to capital flight mentioned above) to try and encourage domestic investments[1]. If I had to pick one sign that there might be trouble ahead, it would be this one. It's one thing to try and clamp down on people dodging capital controls, but it's another thing entirely to try and limit international investments that would broaden China's economic footprint.
And one final thought. While there are some troubling signs, no major modern economy is or has been as tightly controlled as China's. So I don't think anyone really knows how this will play out. It's quite possible that they thread the needle and keep everything rolling smoothly. And as others mentioned in this thread, there are plenty of examples in history where massive infrastructure investments caused some big financial pain/failures in the short term, only to result in positive long term impacts. It's quite possible that China is playing the long game here, ready to suffer some short term pain, but looking 20-30 years down the road. As their economy matures, infrastructure projects will get more expensive (see the US for example), so might as well overbuild now.
From my understanding, capital outflows seek higher returns in foreign markets which would eventually (in theory) be repatriated to drive eventual consumption. If the Yuan is strengthened, would this not make foreign produced goods cheaper to consume within the country? Would it truly be a "crash" if goods are consumed domestically instead of shipped to foreign countries? Considering the high savings rate, could these accelerated savings be used to purchase productive foreign assets?
Strange times, to say the least.