It would go a long way towards fighting inflationary pressures that the nation is facing, as well as increase the purchasing power of Chinese people. The counter-cyclical factor appears to be nothing more than a black box that prevents calculation of how the yuan Chinese yuan and economic balance is fixed To be blunt, the counter-cyclical factor appears to be nothing more than a black box that prevents calculation of how the yuan rate is fixed based on the procedure specified by the PBOC.
A further reason that the Chinese currency will not be used as a trade weapon is that a strong yuan is much better as a tool of geopolitical influence.
That policy makes it more attractive for investors to hold assets in US dollars, prompting them to sell other currencies. In the red area the Yuan is falling against the dollar and the PBoC is forced to buy back Yuans with previously accumulated dollars.
QEII has prompted a massive influx of investors into emerging market bonds, searching for lower yields. Trump claimed in July that China was "manipulating" its currency lower. The savings they accumulate are controlled and directed as the kings see fit.
China epitomized Kallipolis for all the kings out there, which is probably why criticism of the system felt personal to them. The question of whether to let the exchange rate or the banking system take the hit seems to be a question up for debate, even among the red kings in Beijing.
Banks will be forced to scale back, the infamous Chinese shadow system is under regulatory attack and in any case, debt funding costs will be more expensive for the thousands upon thousands of companies with restricted cash-flows.
In conclusion, the Chinese miracle is built on a pile of debt with only an unconstrained printing press to support it. This is another move by the Chinese authorities to stabilise the currency, as the yuan has fallen sharply since trade tensions started to escalate.
The problem with this line of thinking is that the exchange rate target will have to be abandoned if they do. That being said, there were still Japan-bulls in the late s that still believed Japan would eventually become the largest economy on the planet and dominate the world.
That indicates the yuan is not being used as a weapon against the trade tariffs — and nor is it likely to be. The blue and red circles are represented with the same color code in the Yuan chart below.
Economists generally agree Beijing kept the currency artificially low in the past, but they are skeptical that government intervention has driven it down against the dollar and other major currencies this year.
Accused of manipulation The decline has drawn the attention of President Trump, who has often accused China of devaluing the yuan to boost its huge export industry. There is never a free lunch in investment.
A currency managed in line with a stable basket of currencies does not make China a currency manipulator It looks as if it is trading about where it would be if it were freely floating, rather than being managed. Paradoxically, a China seeing itself as an equal and moving its economy towards a better sense of balance and harmony with other global economic powers is more likely to succeed than the one that was looking for a free lunch.
An economy with lower but achievable growth targetsincreased efficiency in state-owned enterprises and a stable currency will make the West more comfortable.
The authorities have tried to lessen the pain recently by increasing government spending, relaxing monetary policy and reducing taxes and bureaucracy, but they cannot ease it entirely.
Commodity prices collapsed as the China Miracle probably grinded to a halt. Many banks in Taiwan offered higher interest rates to attract yuan deposits in August, with Standard Chartered Bank offering 3.
However, in the period leading up to the great financial crisis foreigners bloated on credit were more than happy to indulge themselves with cheap Chinese goods.
Uncontrolled and unregulated lending was reported to be as large as the official banking sector itself. With the PBoC fighting to defend the Yuan they will certainly create trouble in domestic money markets. China, as we all know, is extremely simple.
It recently confirmed that the so-called counter-cyclical factor mechanism has been reintroduced to ease the depreciation pressure on the yuan. It is easy to be cynical about political pronouncements but the data tells us that, for a year or so, the yuan has closely followed the US dollar index and the highs and lows of the euro.
As they crank up the printing press once more, further Yuan depreciation will be the way forward. Domestic problems will engulf the leadership in Beijing, and there will be less time to squabble over petty reefs in the South China Sea.
A Chinese currency that accurately reflects economic fundamentals is not only in the interest of the United States and the world, but also China. We never bought into it and our prediction for is that most of the pundits commenting on the red Dragon will realize how bad the situation in China really is.10 days ago · China said Tuesday it would retaliate for President Trump’s latest tariff salvo, risking further U.S.
trade actions that could result in what some analysts are calling an economic Cold War. By. Chinese policymakers are taking steps to support economic growth, announcing additional corporate tax cuts and the need to speed up infrastructure spending.
China’s economy has slowed in recent.
5 days ago · China's local government debt balance stood at trillion yuan (about trillion U.S. dollars) by the end of August, remaining within the official limit, according to the Ministry of. Nov 30, · Watch video · The IMF will add the yuan to its basket of reserve currencies, an international stamp of approval of the strides China has made integrating into a global economic system dominated for decades by.
Confidence in economy improves in September: survey; Chinese yuan deposits up for 3rd straight month in August Data compiled by the bank showed the balance of yuan deposits received by.
At this stage reserve requirements are lowered in order to free up more Yuan by leveraging banks’ balance sheets, The enormous amount of waste embedded in the system as a result of years of inflationary policies has left the Chinese economy riddled with bad debt and probably trillions in non-performing loans.