In the past few weeks, China has signaled that it will arrest the currency appreciation, allow the use of leveraged collateral for international investment and finally deal with overheating domestic prices. This means that it should accelerate outbound investment by selling FX to buy USD and Euro assets.  This means a reduction in the RRR, a domestic reduction in deposits and sales of dollar holdings. Reserves in the West are large, but let’s not forget that China has the largest reserves globally ($3.1 Tr. or 32% of GDP). This is a potential release of trillions of dollars of leveraged dollars for international purchases. This suggests chronic underperformance of PRC domestic assets relative to overseas assets. It suggests upward pressure on US bond yields. It also suggests a sideways CNY at best.