Third, if speculators were pushing prices above their fundamental levels, one would expect to see inventory levels rising, reflecting unwanted output. This has not been the case, however. In most instances inventory levels have been falling as prices have been rising, suggesting excess real demand.
As this capital flowed into China, the central bank offset some of the upward pressure on the exchange rate by purchasing foreign currency and buying foreign assets. Over the past couple of years, though, things have changed, with the RMB depreciating against the US dollar, alongside persistent expectations for further depreciation.