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Yuan falls to 11-year low

bloomberg.com

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Re: Yuan falls to 11-year low

#61

Post by seanmcdirmid »

DuskStar wrote: post #59
seanmcdirmid wrote: post #54

Earlier quoted context omitted.

Yes, they clamped down on Chinese quotas, but not foreigner quotas. Your comment: > --a lot of non-Chinese companies immediately backed off on Chinese investments (i.e., factories, etc.) That meant foreign companies on Chinese investments, not Chinese companies on foreign investments, right?

Doesn't China require that a lot of ventures be majority owned by Chinese citizens? I could see that money ending up 'contaminated' and hard to pull back out of the country later.

Some JVs have a 51-49 rule, but these are mostly being liberalized. Basically, most foreign companies are underwater on their quotas so they can convert as much as they need to. All they have to show is that they either converted that much to RMB earlier or earned that much and paid taxes on it.

Tech companies like Microsoft fully own their Chinese subsidiary.

Re: Yuan falls to 11-year low

#62

Post by zopa »

PKop wrote: post #27
ianai wrote: post #20

Earlier quoted context omitted.

MMT disagrees with the entire premise of your comment. The “why is this happening” podcast has an excellent explanation.

I know they do. The IMF does not. Read the playbook that the Fed / Treasury are likely running [0] Consists of: 1: Regulate the bond market to be very illiquid 2: Touch off deflation scare to herd the masses into USTs & sovereigns while CBs buy gold 3: Implement aggressive version of MMT 4: Watch bond bulls burn in real terms after you've lit their "Hotel California" on fire (MMT, monetize debt, devalue $) MMT depend…

> This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.

From the first page of the paper you cite.

Re: Yuan falls to 11-year low

#63

Post by reggieband »

joeyrideout wrote: post #11

Real Vision has some great commentary on the Yuan and its implications. Most recently: https://www.youtube.com/watch?v=1ssFICVFH40 The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.

I"m having trouble really understanding what is going on in the linked conversation, I hate to admit it.

The most simplistic interpretation I have is China and the US are playing a game of financial chicken. US raises tariffs and China lowers its currency. At some point, based on China's slowing economy and debt load this could trigger a major global recession since China will no longer be able to prop up economies that have been relying on its cash to purchase imports (e.g. Australian resources). In fact, China probably has to do this anyway at some point in time to offload the accumulating bad debt.

If anyone can ELI5 for me I would appreciate it. My impression is that Trump is betting China may just be desperate enough to seem stable (from an economy and currency standpoint) and may actually be willing to concede to his trade war. The guy in video seems to be saying that China may just accept some currency devaluation (other rich countries have done it and survived) and use the opportunity to fix some bad debt in their economy. If they do so, and they may just do so, then they can choose a policy that minimizes impact to their internal economy. That would likely cause major problems for everyone else.

I'm having a hard time seeing a good conclusion to this mess if I'm understanding correctly.

Re: Yuan falls to 11-year low

#64

Post by sremani »

vkou wrote: post #47
sremani wrote: post #45

Earlier quoted context omitted.

The magic of Chinese two step. There is a glut of Yuan in China while there is a scarcity outside. All you have to do is take a look at their M3. PBOC is printing like no tomorrow, but cleverly puts a wall with they CNY-CNH shit. Deep Throat says it should be 20 to 1 not 7 to 1.

The purpose of this isn't to fuck with foreign economies, or to kill jobs in America, or any of that other nonesense. The purpose of this is to serve as a tax on Chinese exporting companies. They get paid in USD, but they have to pay their suppliers and workers in Yuan. They are being robbed by their own government, because they are exchanging USD for Yuan at a disadvantageous rate. I don't understand why people who…

You are seeing the effects of this "manipulated" exchange rate in American real-estate in every metro-area.

One thing you have to understand is, the exchange controls are for plebs, but the connected including the members of Politburo and State Owned firms (directly or indirectly), can happily get dollar in exchange of the funny money and buy REAL assets across the world. It can viewed benignly or nefariously based on what you think their end game.

But its effecting every one especially if you are in real-estate but also other things.

Re: Yuan falls to 11-year low

#65

Post by Rolivaw »

reggieband wrote: post #63
joeyrideout wrote: post #11

Real Vision has some great commentary on the Yuan and its implications. Most recently: https://www.youtube.com/watch?v=1ssFICVFH40 The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.

I"m having trouble really understanding what is going on in the linked conversation, I hate to admit it. The most simplistic interpretation I have is China and the US are playing a game of financial chicken. US raises tariffs and China lowers its currency. At some point, based on China's slowing economy and debt load this could trigger a major global recession since China will no longer be able to prop up economies t…

The short answer is china doesn’t have a lot of options. It’s not clear what leverage they can find, I’m guessing they just don’t want to seem weak and give in. Trade is so unfair the US has practically nothing to lose.

China is actually keeping its currency from devaluating right now(trump is playing the media) If all controls are lifted the currency will plummet. Many friends in china have expressed their desire to get out a portion of their cash, and surely nobody is thinking about investing.

Re: Yuan falls to 11-year low

#66

Post by canada_dry »

Rolivaw wrote: post #65
reggieband wrote: post #63

Earlier quoted context omitted.

I"m having trouble really understanding what is going on in the linked conversation, I hate to admit it. The most simplistic interpretation I have is China and the US are playing a game of financial chicken. US raises tariffs and China lowers its currency. At some point, based on China's slowing economy and debt load this could trigger a major global recession since China will no longer be able to prop up economies t…

The short answer is china doesn’t have a lot of options. It’s not clear what leverage they can find, I’m guessing they just don’t want to seem weak and give in. Trade is so unfair the US has practically nothing to lose. China is actually keeping its currency from devaluating right now(trump is playing the media) If all controls are lifted the currency will plummet. Many friends in china have expressed their desire to…

> I’m guessing they just don’t want to seem weak and give in.

China has significantly more discipline than the current US administration and opposite to Trump's short-term shoot-from-the-hip approach, they are likely taking a page from Sun Tsu:

If your enemy is secure at all points, be prepared for him. If he is in superior strength, evade him. If your opponent is temperamental, seek to irritate him. Pretend to be weak, that he may grow arrogant. If he is taking his ease, give him no rest. If his forces are united, separate them. If sovereign and subject are in accord, put division between them. Attack him where he is unprepared, appear where you are not expected.

Re: Yuan falls to 11-year low

#67

Post by Fjolsvith »

canada_dry wrote: post #66
Rolivaw wrote: post #65

Earlier quoted context omitted.

The short answer is china doesn’t have a lot of options. It’s not clear what leverage they can find, I’m guessing they just don’t want to seem weak and give in. Trade is so unfair the US has practically nothing to lose. China is actually keeping its currency from devaluating right now(trump is playing the media) If all controls are lifted the currency will plummet. Many friends in china have expressed their desire to…

> I’m guessing they just don’t want to seem weak and give in. China has significantly more discipline than the current US administration and opposite to Trump's short-term shoot-from-the-hip approach, they are likely taking a page from Sun Tsu: If your enemy is secure at all points, be prepared for him. If he is in superior strength, evade him. If your opponent is temperamental, seek to irritate him. Pretend to be we…

It seems to me that China has been assuming Trump's been shooting-from-the-hip and short-sighted, and allowed themselves to be outmaneuvered by him. People call Trump incompetent and bumbling and other unflattering terms, but Trump is actually very smart and is playing with a full house from a deck he stacked himself.

Re: Yuan falls to 11-year low

#68

Post by Fjolsvith »

jussij wrote: post #57
chrisjc wrote: post #43

Earlier quoted context omitted.

Doesn't the increase in cost of supplying the money that Americans need to buy Chinese goods (buying TBonds) just offsetting making goods cheaper?

For many years the value of the Chinese exports to the USA have been much greater than it's USA imports. This large trade surplus basically means China earns a lot of USD and it uses those US dollars to buy US T-Bonds. So for T-Bonds the USD/Yaun exchange rate does not come into the picture. But that low USD/Yaun exchange rate does help to keep Chinese exports cheap and that then helps to protect their trade surplus.

Its win/win for the USA. Trump gets to push the Chinese around and American consumers get to keep buying cheap Chinese goods.

Re: Yuan falls to 11-year low

#69

Post by hatch_q »

reggieband wrote: post #63
joeyrideout wrote: post #11

Real Vision has some great commentary on the Yuan and its implications. Most recently: https://www.youtube.com/watch?v=1ssFICVFH40 The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.

I"m having trouble really understanding what is going on in the linked conversation, I hate to admit it. The most simplistic interpretation I have is China and the US are playing a game of financial chicken. US raises tariffs and China lowers its currency. At some point, based on China's slowing economy and debt load this could trigger a major global recession since China will no longer be able to prop up economies t…

China is creating controlled inflation - they are basically printing new yuans. That might seem like a bad idea, but China is using newly created currency to buy US treasury bonds (actually buying US debt). China is basically creating a huge leverage on US and on the same time it gives USA cheap debt to buy it's own products, and weak Yuan also causes their exports to be even cheaper.

On May 2019 china had 1.11 trillion USD bonds. And at any point china may decide to sell it off - which will crash USD.

Re: Yuan falls to 11-year low

#70

Post by Rolivaw »

Fjolsvith wrote: post #67
canada_dry wrote: post #66

Earlier quoted context omitted.

> I’m guessing they just don’t want to seem weak and give in. China has significantly more discipline than the current US administration and opposite to Trump's short-term shoot-from-the-hip approach, they are likely taking a page from Sun Tsu: If your enemy is secure at all points, be prepared for him. If he is in superior strength, evade him. If your opponent is temperamental, seek to irritate him. Pretend to be we…

It seems to me that China has been assuming Trump's been shooting-from-the-hip and short-sighted, and allowed themselves to be outmaneuvered by him. People call Trump incompetent and bumbling and other unflattering terms, but Trump is actually very smart and is playing with a full house from a deck he stacked himself.

I agree more with this type or reasoning. He or his administration knows full well that they are holding all the aces. So the Chinese can pretend to play tsun tzu all they want, US just needs to hold. Currently it’s looking much worse for china, but hey things can change and very very quickly.
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