Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

China Moves to Devalue Yuan

wsj.com

Post reply on HN
Print view View original

31–40 of 65 posts

Re: China Moves to Devalue Yuan

#31

Post by Asbostos »

pjc50 wrote: post #21
jvm wrote: post #10

The 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…

I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

What's wrong with paying rent to someone in another country? There's the argument that the money doesn't come back into the local economy, but in this case it clearly does - they bought the house by paying a local seller.

Re: China Moves to Devalue Yuan

#32

Post by pjc50 »

lubos wrote: post #30
go1979 wrote: post #23

Earlier quoted context omitted.

I fully believe the capital outflow link to the rise in western real estate prices. As someone unlucky enough to be caught without any property, I am perplexed by the reasonable response. Friends have responded by taking insane loans (since property prices went up after said loans, these were really prudent financial decisions). I am at a loss. Will I be buying at the top? :(

Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out. And even though real-estate value has increased a lot. Rental income from these properties didn't increase at the same rate. Tenants can't afford to pay rent landlords would like to charge so there is downwards pressure on returns these properties can generate. Not to mention, interest rates are at record low. Wh…

Lots of people suspect that the Chinese purchase of overseas property is mostly an expression of distrust at the Chinese government. Remember that China is still (very nominally) communist and not afraid to confiscate property of people who are sufficiently discredited. It happens occasionally in corruption crackdowns.

For this purpose, it's a minimum-risk store of wealth with a potential for appreciation and any actual returns are less of a priority. Something similar applies to Saudi and Russian oil wealth; an escape from the possibility of SHTF.

Re: China Moves to Devalue Yuan

#33

Post by mistermann »

lubos wrote: post #30
go1979 wrote: post #23

Earlier quoted context omitted.

I fully believe the capital outflow link to the rise in western real estate prices. As someone unlucky enough to be caught without any property, I am perplexed by the reasonable response. Friends have responded by taking insane loans (since property prices went up after said loans, these were really prudent financial decisions). I am at a loss. Will I be buying at the top? :(

Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out. And even though real-estate value has increased a lot. Rental income from these properties didn't increase at the same rate. Tenants can't afford to pay rent landlords would like to charge so there is downwards pressure on returns these properties can generate. Not to mention, interest rates are at record low. Wh…

> Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out.

Except often they don't, rental income is almost like a rounding error to them (it's not really, but they can't be bothered - the main thing, it seems, is buying the asset.)

Re: China Moves to Devalue Yuan

#34

Post by vegabook »

zhte415 wrote: post #29
vegabook wrote: post #14

CNYEUR (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…

Nice ASCII. But surely this is a function of USD vs other currencies, as CNY is mainly fixed against USD.

Absolutely. But with the current peg, where USD goes so the CNY goes. Given that only 20% of Chinese exports are to America, China is becoming uncompetitive on its trade-weighted basket and must adjust in the same direction as other currencies, that is, weaker vs USD.

Re: China Moves to Devalue Yuan

#35

Post by mistermann »

adventured wrote: post #13

Some 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.…

I've had this theory for a very long time that the massive number of extremely low paid workers in China is what enables the US's ZIRP and printing of money. You used to always read about the "bond vigilantes" who would drive interest rates up when too much currency was printed, but I can't even recall the last time I heard the phrase "bond vigilante" used in an article.

It's a common truism that governments can't (in the long term) set the price of money (eventually it will collapse as the market asserts reality upon the situation), but as I understand it, for quite some time now, the US Treasury is the bond market - as the largest buyer, they set the real interest rates, and the workers in China churning out cheap goods for $2/hr control the consumer price index inflation that would otherwise show up.

I've never thought this through at all though (and am probably not smart enough to), but have always wondered if there's some meat to this theory.

Re: China Moves to Devalue Yuan

#36

Post by clavalle »

Asbostos wrote: post #31
pjc50 wrote: post #21

Earlier quoted context omitted.

I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

What's wrong with paying rent to someone in another country? There's the argument that the money doesn't come back into the local economy, but in this case it clearly does - they bought the house by paying a local seller.

Unless they bought it from a foreign investor.

There is something to be said for not having another country control property that one's citizens need to live. What if another country started buying up farmland, for example?

Beyond that they have no interest beyond financial to, say, keep things nice or affordable or to encourage sustainable growth or any of the other bonuses communities get when they have locals own property.

Re: China Moves to Devalue Yuan

#37

Post by bkeroack »

pjc50 wrote: post #21
jvm wrote: post #10

The 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…

I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

Which is actually nice for the US, since Chinese buyers can't pick up a piece of real estate and bring it back home with them, and the ownership obligates them to pay taxes, etc.

It hurts the domestic home buyer, though, who has to compete with inflated all-cash offers from these foreign investors.

Re: China Moves to Devalue Yuan

#38

Post by jpollock »

clavalle wrote: post #36
Asbostos wrote: post #31

Earlier quoted context omitted.

What's wrong with paying rent to someone in another country? There's the argument that the money doesn't come back into the local economy, but in this case it clearly does - they bought the house by paying a local seller.

Unless they bought it from a foreign investor. There is something to be said for not having another country control property that one's citizens need to live. What if another country started buying up farmland, for example? Beyond that they have no interest beyond financial to, say, keep things nice or affordable or to encourage sustainable growth or any of the other bonuses communities get when they have locals own…

Citizens (and occasionally residents) have ultimate control over the land, through control of taxation and regulation.

Re: China Moves to Devalue Yuan

#39

Post by gutnor »

go1979 wrote: post #23
pjc50 wrote: post #21

Earlier quoted context omitted.

I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

I fully believe the capital outflow link to the rise in western real estate prices. As someone unlucky enough to be caught without any property, I am perplexed by the reasonable response. Friends have responded by taking insane loans (since property prices went up after said loans, these were really prudent financial decisions). I am at a loss. Will I be buying at the top? :(

Careful here with the "prudent financial decisions" They took a risk and it paid off. It is only prudent if they were in a position to take the loss if the market had gone the other way. And I assume they still have their loan, so they are still at risk of losing the mean to pay it. Big risk, big reward/losses.

I talked to a guy that became property millionaire, if I had followed the exact same step he took, just with 2 years difference and a different city, I would have been in bankruptcy right now. You didn't/couldn't take a loan when they did - that boat has sailed. Buying today is a different market and you should approach it ignoring what you friends did in the past.

I won't give you market advise as I don't have a crystal ball. However, as a renter you are free to move around - that's your strength. Alternative to buying is therefore to move around and maximize your bang per rental buck. In most cities, there are areas where people would rather rent than buy and vice versa. Try to rent in the place where the rental yield is the minimum. Also, you have can look for better job opportunities that requires moving.

Re: China Moves to Devalue Yuan

#40

Post by toomuchtodo »

pjc50 wrote: post #21
jvm wrote: post #10

The 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…

I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

> To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

Warren Buffet warned us of this years ago (trade deficit causing real estate transfer between nations):

https://www.youtube.com/watch?v=M-vMxKvYfVs

Post reply on HN