I wonder if they'll actually let it float this time. I thought when they previously devalued it to 6.20 a few years ago they claimed they'd float it but instead kept it statically pegged. Given macro-conditions, floating would probably make a lot more sense (if you agree with Tyler Cowen's perspective).
China Moves to Devalue Yuan
11–20 of 65 posts
Re: China Moves to Devalue Yuan
#12China is devaluing yuan for quite a while, but usually more smoothly. Will this that do the trick or there is problem in fundamentals? Like debt is growing too fast comparing to rest of the economy. Moreover, will China start making transition from cheap labour, efficiency based economy to innovation based one. Does government is aware of that challenge or they try to execute strategy for old model, that used to work…
As long as the government doesn't allow unobstructed access to foreign websites that aren't even remotely related to politics I don't see that transition any time soon.
I'm the last person to be an apologist for the Great Firewall, but how does it preclude the OP's point? The Chinese-language web and Chinese Internet users represent a pretty sizeable chuck, to the point that it's self-sustainable and innovation definitely occurs within this space. The Great Firewall just results in a walled garden; access to Facebook isn't going to magically spur innovation!
(Don't get me wrong: The Great Firewall is not a good thing, but I don't see it being wholly relevant here.)
Re: China Moves to Devalue Yuan
#13Some likely effects from this:
1) US consumers just got a small standard of living boost. The same things they were buying before, will now cost less. It'll have little to no effect on US domestic manufacturing.
2) This will put some downward pressure on US consumer prices. Giving the Fed even less inflation concern (at least from the CPI angle).
3) The Fed is very, very unlikely to raise interest rates in September. It's practically guaranteed not to happen. Investors are likely to bet on this today, and stocks will probably climb significantly over the next few months in response to the Fed not hiking. The bet will shift from expecting a hike, to not expecting one for the remainder of 2015.
4) This will add fuel to the currency wars. The Eurozone, Japan and others will probably respond. It'll also put pressure on emerging market competitors, from Brazil to Vietnam.
5) It's going to squeeze some Chinese companies carrying debt in other currencies (Bloomberg reports that Chinese companies have $529 billion in dollar and euro based bonds and loans outstanding).
6) The dramatic capital flight out of China over the course of 2015 ($300+ billion so far), will increase.
Re: China Moves to Devalue Yuan
#14CNYEUR (euro per cny) exchange rate past 60 months:
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0.15 + ** +
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CNYJPY past 60 months:
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20 + * * +
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0 10 20 30 40 50 60Re: China Moves to Devalue Yuan
#15CNYEUR (euro per cny) exchange rate past 60 months: ++-------+------+-------+------+-------+------+--+ 0.15 + ** + | * | | *** | | ** | 0.14 + + | | | | | * | 0.13 + ** + | * * | | *** * * | | * ** * * * | | * ** *** * * | 0.12 + * ** * * ** + | * * *** | | * | | ** * | 0.11 + * * * + | * * *** | | * | ++-------+------+-------+------+-------+------+--+ 0 10 20 30 40 50 60 Against the euro, the CNY has appreciated by…
The JPY is down against pretty much everything else due to some of the most aggressive QE ever seen though.
Re: China Moves to Devalue Yuan
#16I wonder if they'll actually let it float this time. I thought when they previously devalued it to 6.20 a few years ago they claimed they'd float it but instead kept it statically pegged. Given macro-conditions, floating would probably make a lot more sense (if you agree with Tyler Cowen's perspective).
But politically, that would be relinquishing a degree of control, something they've been loath to do in general, especially in areas that are of strategic importance.
Re: China Moves to Devalue Yuan
#17CNYEUR (euro per cny) exchange rate past 60 months: ++-------+------+-------+------+-------+------+--+ 0.15 + ** + | * | | *** | | ** | 0.14 + + | | | | | * | 0.13 + ** + | * * | | *** * * | | * ** * * * | | * ** *** * * | 0.12 + * ** * * ** + | * * *** | | * | | ** * | 0.11 + * * * + | * * *** | | * | ++-------+------+-------+------+-------+------+--+ 0 10 20 30 40 50 60 Against the euro, the CNY has appreciated by…
What did you use to create these charts? I like them.
Re: China Moves to Devalue Yuan
#18The PRC has had a historical policy of linking the RMB to the dollar. That made sense when they were primarily reliant on exports to the US, but now that their exports are diversified and they have massive domestic demand, a float and inflation peg like we have in the US is a much more sensible policy. The US dollar has an absurdly high valuation, so the sensible thing for the RMB (and most other currencies) is to de…
If you consider the dollar to have an absurdly high valuation, what do you think about the GBP and, until a year ago, the EUR?
Re: China Moves to Devalue Yuan
#19The PRC has had a historical policy of linking the RMB to the dollar. That made sense when they were primarily reliant on exports to the US, but now that their exports are diversified and they have massive domestic demand, a float and inflation peg like we have in the US is a much more sensible policy. The US dollar has an absurdly high valuation, so the sensible thing for the RMB (and most other currencies) is to de…
If you consider the dollar to have an absurdly high valuation, what do you think about the GBP and, until a year ago, the EUR?
Also CHF! Historically, the dollar isn't so high as other currencies are weak. The dollar is not overvalued by any measure.
Re: China Moves to Devalue Yuan
#20CNYEUR (euro per cny) exchange rate past 60 months: ++-------+------+-------+------+-------+------+--+ 0.15 + ** + | * | | *** | | ** | 0.14 + + | | | | | * | 0.13 + ** + | * * | | *** * * | | * ** * * * | | * ** *** * * | 0.12 + * ** * * ** + | * * *** | | * | | ** * | 0.11 + * * * + | * * *** | | * | ++-------+------+-------+------+-------+------+--+ 0 10 20 30 40 50 60 Against the euro, the CNY has appreciated by…
What did you use to create these charts? I like them.
R package txtplot.