janjak desalin
Junior Member
I think most that have commented here understood the context as of yesterday!
Still at - 1.00%, btw!
Chinese Economics Thread
- Thread starter Norfolk
- Start date
Still at - 1.00%, btw!
So China loosens its control of RMB in order to make it eligible for inclusion into the SDR basket at the same time inspiring headlines that Mrs Yellen will not raise the Fed's interest rate. This low interest rate leads to all kinds of mal-investment in Western economies that are very damaging to those economies. Interesting.
Miragedriver
Brigadier
China has devalued the yuan. What does it means for UK shares and the economy?
China’s authorities have taken a shock decision to let the as they try to fend off slowing growth.
The resulting fall on Tuesday was the biggest one-day drop in the currency’s value since January 1994. A further devaluation on Wednesday pushed the yuan down further.
The move has reverberated around the world, with the , driven by a drop in miners.
There could be more trouble on the way for UK-listed shares. China is the world's biggest consumer of metals, and a slowdown in the world's second largest economy is expected to drag down miners - and Britain's benchmark index - further.
UK retailers with a large exposure to China have also been hit. Shares in Burberry fell 4.4pc on Tuesday. The company has around 100 stores in mainland China, which accounts for about 14pc of the company's sales. The weaker yuan makes imports more expensive, and shares fell on concerns about export demand for luxury goods makers.
Worries about slower growth in China have not appeared overnight. Angela Ahrendts, Burberry's former chief executive, warned in October 2013 that a Chinese slowdown "is maybe not a temporary accident but a new normal”.
What does it mean for British exports and the pound?
In terms of the wider implications of a Chinese slowdown, official data shows just over 4pc of UK exports go to China, worth about £18bn. But as the Confederation of British Industry (CBI) highlights, growth has been strong. Exports to China grew 9pc between 2013 and 2014.
Rain Newton-Smith, the CBI's director for economics, said:
This move to allow the renminbi to drop a little could help support Chinese growth, against the backdrop of an unexpectedly sharp fall in the country’s exports in July.
Although a depreciation in the renminbi against sterling will put pressure on UK exports to China in the short term, the effect on Chinese growth should be beneficial to UK exporters over the longer term.
So why has China devalued its currency?
One of the most straightforward reasons it that it wants to stimulate growth.
China has had a torrid time of late: its stellar growth has slowed down and its stock market has been in turmoil for the last few months, with after a high earlier this year.
According to data released over the weekend, China watchers were expecting a prompt response from the authorities - but a currency devaluation was not anticipated.
The (PBoC) on Tuesday stated that the move was a “one-off” adoption of a market-based approach to setting the yuan's value.
But to many, the decision looks an awful lot like an attempt to stimulate the economy.
Sean Yokota, head of Asia strategy at Nordic corporate bank SEB, said that growth fears were one of the main reasons for the intervention. The currency’s strength was putting pressure on exporters, hampering output and most likely employment too, therefore it needed to fall.
The PBoC has lowered interest rates four times since November to support the Chinese economy, which is expected to grow at around 7pc this year - the slowest expansion since 1990. But with the yuan devaluation, it looks like China has reached for stronger measures to support its GDP.
Amy Yuan Zhang, an economist at Nordea, said: "Beijing has adopted a 'whatever it takes' approach to prevent growth falling too much below the 7pc target for this year."
In an interview with The Telegraph, Zhu Guangyao, China’s vice finance minister, said that there were , but added he was confident that the government would be able to steady the sell-off in stocks.
Tyler Cowen, of George Mason University, : “Take this to be a signal of Chinese weakness. Overall this is a sign of surrender to the market."
Desire for elite currency status
The other reason for the PBoC's surprise move on the yuan is that China's authorities have long wanted the renminbi to gain a coveted status as a global reserve currency.
The devaluation could help the yuan gain inclusion in the International Monetary Fund’s Special Drawing Rights (SDR) basket of currencies. This is “an elite reserve currency status”, as Mr Yokota put it.
If included, the yuan would be among the currencies loaned to sovereign borrowers by the IMF in times of distress.
For now, the SDR basket contains just four currencies - sterling, the euro, the US dollar, and Japan's yen. The IMF has said that "significant work" is needed for the yuan to be added to the group.
Inclusion in the SDR basket is unlikely to help China financially. Rather, the status is one Beijing desires largely for reasons of vanity, marking it out as one of the world's most important countries.
Before Tuesday's move was announced, Jason Daw, of Societe Generale, said that there was a 70pc chance of the renminbi's inclusion in the IMF's basket, as a result of recent efforts to liberalise China and its currency.
After Tuesday's devaluation, the chances of the renminbi gaining inclusion are even stronger. The latest IMF review postponed a decision on the currency’s inclusion in the SDR basket until September 2016.
“This proposal indicates the IMF’s willingness to give China more time to make enough effort for the renminbi to qualify, and is thus a positive sign," Mr Daw said.
The PBoC opted to completely adjust the methodology by which it fixes its currency, rather than just increasing the band in which it is allowed to trade against this dollar. This decision “shows that the liberalisation and SDR inclusion is a high priority for China’s leaders”, Mr Yokota explained.
Tuesday's events show that Beijing has chosen to remain on the tightrope - refusing to give up on growth, while still wanting access to an elite club of market-based economies.
China and the rest of the world will be hoping that they don't fall off.
Back to bottling my Grenache
China’s authorities have taken a shock decision to let the as they try to fend off slowing growth.
The resulting fall on Tuesday was the biggest one-day drop in the currency’s value since January 1994. A further devaluation on Wednesday pushed the yuan down further.
The move has reverberated around the world, with the , driven by a drop in miners.
There could be more trouble on the way for UK-listed shares. China is the world's biggest consumer of metals, and a slowdown in the world's second largest economy is expected to drag down miners - and Britain's benchmark index - further.
UK retailers with a large exposure to China have also been hit. Shares in Burberry fell 4.4pc on Tuesday. The company has around 100 stores in mainland China, which accounts for about 14pc of the company's sales. The weaker yuan makes imports more expensive, and shares fell on concerns about export demand for luxury goods makers.
Worries about slower growth in China have not appeared overnight. Angela Ahrendts, Burberry's former chief executive, warned in October 2013 that a Chinese slowdown "is maybe not a temporary accident but a new normal”.
What does it mean for British exports and the pound?
In terms of the wider implications of a Chinese slowdown, official data shows just over 4pc of UK exports go to China, worth about £18bn. But as the Confederation of British Industry (CBI) highlights, growth has been strong. Exports to China grew 9pc between 2013 and 2014.
Rain Newton-Smith, the CBI's director for economics, said:
This move to allow the renminbi to drop a little could help support Chinese growth, against the backdrop of an unexpectedly sharp fall in the country’s exports in July.
Although a depreciation in the renminbi against sterling will put pressure on UK exports to China in the short term, the effect on Chinese growth should be beneficial to UK exporters over the longer term.
So why has China devalued its currency?
One of the most straightforward reasons it that it wants to stimulate growth.
China has had a torrid time of late: its stellar growth has slowed down and its stock market has been in turmoil for the last few months, with after a high earlier this year.
According to data released over the weekend, China watchers were expecting a prompt response from the authorities - but a currency devaluation was not anticipated.
The (PBoC) on Tuesday stated that the move was a “one-off” adoption of a market-based approach to setting the yuan's value.
But to many, the decision looks an awful lot like an attempt to stimulate the economy.
Sean Yokota, head of Asia strategy at Nordic corporate bank SEB, said that growth fears were one of the main reasons for the intervention. The currency’s strength was putting pressure on exporters, hampering output and most likely employment too, therefore it needed to fall.
The PBoC has lowered interest rates four times since November to support the Chinese economy, which is expected to grow at around 7pc this year - the slowest expansion since 1990. But with the yuan devaluation, it looks like China has reached for stronger measures to support its GDP.
Amy Yuan Zhang, an economist at Nordea, said: "Beijing has adopted a 'whatever it takes' approach to prevent growth falling too much below the 7pc target for this year."
In an interview with The Telegraph, Zhu Guangyao, China’s vice finance minister, said that there were , but added he was confident that the government would be able to steady the sell-off in stocks.
Tyler Cowen, of George Mason University, : “Take this to be a signal of Chinese weakness. Overall this is a sign of surrender to the market."
Desire for elite currency status
The other reason for the PBoC's surprise move on the yuan is that China's authorities have long wanted the renminbi to gain a coveted status as a global reserve currency.
The devaluation could help the yuan gain inclusion in the International Monetary Fund’s Special Drawing Rights (SDR) basket of currencies. This is “an elite reserve currency status”, as Mr Yokota put it.
If included, the yuan would be among the currencies loaned to sovereign borrowers by the IMF in times of distress.
For now, the SDR basket contains just four currencies - sterling, the euro, the US dollar, and Japan's yen. The IMF has said that "significant work" is needed for the yuan to be added to the group.
Inclusion in the SDR basket is unlikely to help China financially. Rather, the status is one Beijing desires largely for reasons of vanity, marking it out as one of the world's most important countries.
Before Tuesday's move was announced, Jason Daw, of Societe Generale, said that there was a 70pc chance of the renminbi's inclusion in the IMF's basket, as a result of recent efforts to liberalise China and its currency.
After Tuesday's devaluation, the chances of the renminbi gaining inclusion are even stronger. The latest IMF review postponed a decision on the currency’s inclusion in the SDR basket until September 2016.
“This proposal indicates the IMF’s willingness to give China more time to make enough effort for the renminbi to qualify, and is thus a positive sign," Mr Daw said.
The PBoC opted to completely adjust the methodology by which it fixes its currency, rather than just increasing the band in which it is allowed to trade against this dollar. This decision “shows that the liberalisation and SDR inclusion is a high priority for China’s leaders”, Mr Yokota explained.
Tuesday's events show that Beijing has chosen to remain on the tightrope - refusing to give up on growth, while still wanting access to an elite club of market-based economies.
China and the rest of the world will be hoping that they don't fall off.
Back to bottling my Grenache
Blackstone
Brigadier
Western nations and financial institutions, including US and the IFM, called for China to make the RMB (Yuan) freely convertable for decades, and now the PBoC is working on just that. In a case of be careful what you wish for, the RMB might not be undervalued after all, as some governments, politicians, and business elites have repeatedly charged.
AssassinsMace
Lieutenant General
The people who wail about an under-valued Yuan only see one thing. They want the Yuan valued at a point where outsourcing is more expensive and not cost effective. Thus they believe those jobs that were outsourced return to them. So they don't care if the Yuan is appropriately valued or not.
Here's an interesting article about misperceptions of what's going on in China.
Let's hope "copying" has become a bad word in China. If high-tech jobs in China are near parity to counterparts in the US, don't believe the nonsense about somehow China is losing out on outsourcing from wages being too expensive. That's called China moving up the value chain. Of course some want China to stay in the bottom hence why the spin China is losing from those jobs going to other countries. People owning 3 or more properties and not renting them out? Now you know what's in part why there's ghost cities and not because no one's buying them.
Here's an interesting article about misperceptions of what's going on in China.
Let's hope "copying" has become a bad word in China. If high-tech jobs in China are near parity to counterparts in the US, don't believe the nonsense about somehow China is losing out on outsourcing from wages being too expensive. That's called China moving up the value chain. Of course some want China to stay in the bottom hence why the spin China is losing from those jobs going to other countries. People owning 3 or more properties and not renting them out? Now you know what's in part why there's ghost cities and not because no one's buying them.
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broadsword
Brigadier
Follow-up to the supercapacitor bus. Deal cut to supply 1,200 buses to Ningbo buses.
janjak desalin
Junior Member
so, what we're really saying is that we want this thread closed again?
Yuan down -0.31% today. Trading within a "normal" trading band, although +/- 2.0% isn't, by necessity, outside of "normal".
Note: SD Rules indicate that Red and Blue are for moderator use ony. But thanks for the comment and attempt to help. it is much appreciated.
Yuan down -0.31% today. Trading within a "normal" trading band, although +/- 2.0% isn't, by necessity, outside of "normal".
Note: SD Rules indicate that Red and Blue are for moderator use ony. But thanks for the comment and attempt to help. it is much appreciated.
Last edited by a moderator:
