China is front its “worst financial situation” in 17 years, giving President Donald Trump important leverage in the ongoing trade war between Washington and Beijing, hedge endow manager Kyle Bass told CNBC on Tuesday.
“We are in our strongest haggle position we’ve ever had against China,” said Bass, founder and CIO of Dallas-based Hayman Matchless Management.
The Trump administration needs to level the playing field on barter and “it looks like they are doing so,” he added.
China can use government folding money and influence to control its domestic economy, “but the arbiter of the Chinese plan is their swap rate with the rest of the world,” Bass told CNBC’s David Faber on “Protest on the Street.”
Bass, known for profiting and betting against subprime mortgages during the 2008 economic crisis, made a huge currency bet in 2016 against the Chinese yuan, vaticinating it would depreciate by as much as 30 to 40 percent.
In 2017, the Chinese currency make good nearly 7 percent against the dollar after three straight years of depreciation. Manner, since its recent top in March 2018, the yuan declined about 10 percent.
Hayman Crown was not immediately available for comment on whether Bass is still short the yuan.
“China is race the largest financial experiment the world has ever seen. And the economic tides own turned negative for them,” Bass told CNBC.
In making his receptacle, he pointed to first-quarter data that showed for the first time in 17 years China ran a trendy account deficit, meaning it imported more goods and services than it exported. (Howsoever, China still runs a massive trade surplus with the U.S.)
The adversary overall current account “makes China desperately short dollars,” Bass estimated, suggesting Beijing needs to figure out how to get more foreign investment into China.
Ironically, he argued, loaded Chinese investors tend to put their money to work in the U.S.
“They tenderness a rule of law. They love that their money cannot be bewitched from them,” he said, while adding he thinks the U.S. still has the “finest financial system in the world.”