Question

Explain graphs in a financial perspective. Include the meaning of horizontal and vertical line in the explanation.

Hungry Panda Chinese balance of payments, quarterly Trade surplus Net investment inflows Non-resident portfolio investment flows into emerging markets Public Treasury debt Foreign Treasury holdings Chinese Treasury holdings China Ex-China $150 billion $300 billion $20.0 trillion Estimates 17.5 15.0 12.5 100 7.5 5.0 2.5 0 100 250 50 200 0 150 100 Treasury and -100 foreign asset 50 purchases are counted as outflows 150 1998 2000 05 Sources: CEIC (flows, Treasurys) IIF (emerging markets); 0 2010 15 2014 15 16 17 18 19 10 THE WALL STREET JOURNAL 2000 05 15

Answer 1

1^st graph – In the first graph the horizontal axis represents years while vertical axis represents amount in $ billions. The blue line in the graph represents trade surplus for China. Trade surplus for China is the amount by which its exports exceed the cost of imports. From the graph we can see that for most of the part China had a positive trade surplus and hence we can say that exports for China are quiet strong. It was just in two years (2013 and 2016 – as given in the graph) that its cost of imports was higher than its exports. The second line pertains to net investment inflows. This inflow is the amount of the inward direct investment made by investors in China. This line for China is always in the negative territory (as seen from the graph) and this is because China’s outward direct investments to external economies exceed the amount of inward direct investment being received by it.

2^nd graph - In the second graph the horizontal axis represents years while vertical axis represents amount in $ billions. The graph has two bars – blue bar and grey bar – for each year. The blue bar represents the amount of non-resident portfolio investment flows in China for the given years while the grey bars represents the amount of non-resident portfolio investment flows in other emerging economies, excluding China. From a financial perspective we can see that till 2016 the amount pertaining to China was lower compared to the amount of other emerging economies. But from 2018 onwards (on an estimated basis) China will receive a higher amount of non-resident portfolio investments than all other emerging economies combined (but excluding China). This means that net capital inflows for China will be on a stronger footing on a comparative basis.

3^rd graph - In the third graph the horizontal axis represents years while vertical axis represents amount in $ trillion. There are three lines in the graph. The topmost line represents public treasury debt. We can see from the graph that the level of public treasury debt has been showing an increasing trend and the increase has sharpened from 2010 onwards. The 2^nd line represents foreign treasury holdings and the 3^rd line shows the Chinese Treasury Holdings. The 2^nd line has an increasing trend while the 3^rd line does not have a pronounced increasing trend. In fact it stabilizes from 2013 onwards. This shows that while foreign treasury holdings are increasing the level of Chinese treasury holdings are stagnating.