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Yuan falls to 11-year low

bloomberg.com

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Re: Yuan falls to 11-year low

#71

Post by Fjolsvith »

ccarpenterg wrote: post #46
jonathankoren wrote: post #42

I don't understand this link. It's a trading quote, with no text and an irrelevant embedded video. A much better link would be something that talks about this close. For instance https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-ye... I'm still confused by the coverage, since it's trading at 7 CNY to 1 USD. That's still higher than the 52 week low. Also it's higher on the chart on the right which shows the 5…

It's low in terms of the Yuan's purchase power vis a vis the US dollar. So the Chinese need more Yuan to buy the same products/services from the US. And in contrast, Americans need less US dollars to buy the same products/services from China.

So perhaps the CCP is actually trying to keep American goods and services out of China while delivering Chinese goods and services to the US. Sort of a way of cementing their trade imbalance in defiance to Trump.

Re: Yuan falls to 11-year low

#72

Post by vkou »

sremani wrote: post #64
vkou wrote: post #47

Earlier quoted context omitted.

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 o…

1. Most people who are buying real estate on the coasts don't care about the exchange rate. They don't even care about the value of the assets they are buying. They are doing it because they are buying security, a backup plan, a diversified investment that can't be clawed back by their government, or exposed to the fortunes and misfortunes of China's economy.

2. Most of these buyers are doing it while illegally avoiding capital controls - not with the blessing of the government. It's why Canada is such a popular destination for this money - it has no reporting requirements. The whole point behind China's exchange rate policy, is that it allows US dollars to enter the economy, but due to capital controls, not leave it (Without being subject to the 'tax' of unfavourable exchange rates.) Chinese nationals buying property in North America are not working with the policy. They were working against it

And yes, there's plenty of folks who do have a direct line to the politburo (Or, more likely, black market channels for exchanging money), and can turn their yuan into USD, without trouble, and then get that USD out of China. I don't think they are responsible for the majority of capital flight out of China.

Re: Yuan falls to 11-year low

#73

Post by [deleted] »

seanmcdirmid wrote: post #54
gamblor956 wrote: post #52

Earlier quoted context omitted.

I'm referring specifically to the capital-related currency controls. A few years ago China clamped down on how much cash a person could send/take out of China or exchange for foreign currency. It impacted a number of Chinese companies with operations in the U.S., especially Chinese real estate developers like Greenland, and basically eviscerated the EB5 visa market. I had a number of clients cancel deals because they…

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?

[deleted]

Re: Yuan falls to 11-year low

#74

Post by [deleted] »

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.

[deleted]

Re: Yuan falls to 11-year low

#75

Post by gamblor956 »

seanmcdirmid wrote: post #54
gamblor956 wrote: post #52

Earlier quoted context omitted.

I'm referring specifically to the capital-related currency controls. A few years ago China clamped down on how much cash a person could send/take out of China or exchange for foreign currency. It impacted a number of Chinese companies with operations in the U.S., especially Chinese real estate developers like Greenland, and basically eviscerated the EB5 visa market. I had a number of clients cancel deals because they…

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?

The rule applies to Chinese companies and to the yuan-denominated financial accounts of foreign companies physically doing business in China (meaning having an office or facility in China), which is why it had a dampening effect on foreign investment.

Annoyingly, if you ask a representative of the Chinese government if such a rule exists (before you have sent money into China), they will tell you no such rule exists, or that the rule doesn't apply to foreign companies. They wait until the money is in China and you try to transfer it out of your bank account to let you know that your company is also subject to these rules.

Several US clients of mine found this out the hard way (a few years ago, before the trade war).

Re: Yuan falls to 11-year low

#76

Post by seanmcdirmid »

gamblor956 wrote: post #75
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?

The rule applies to Chinese companies and to the yuan-denominated financial accounts of foreign companies physically doing business in China (meaning having an office or facility in China), which is why it had a dampening effect on foreign investment. Annoyingly, if you ask a representative of the Chinese government if such a rule exists (before you have sent money into China), they will tell you no such rule exists,…

The requirements for doing forex are very different for both entities (and I know this from being a foreign entity with Chinese income and a Chinese bank account). There isn’t one rule, it’s a set of regulations.

Re: Yuan falls to 11-year low

#77

Post by TMWNN »

joeyrideout wrote: post #15
samfisher83 wrote: post #2

The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.

The ECB is negative and preparing to cut lower. BoJ is buying 90%+ of their own bond market. Emerging markets are blowing up routinely, most recently Argentina. Australia and Canada have their own issues. The U.S. isn't perfect but it's comparatively safe with a large military and reserve currency status with positive interest rates giving them room to react short term. (Edit: To be crystal clear, this relative safet…

>To be crystal clear, this relative safety on the world stage means the USD is in demand as a "flight to safety". Same can be said about Treasuries, which is why domestic economic analysis doesn't necessarily align with the recession indicator of an inverted yield curve. The world could be going into recession. It's also worth noting that Gold has been rallying in USD terms, which tells us it's even safer.

In other words, this is 1997 as opposed to 2007-2008.

Re: Yuan falls to 11-year low

#78

Post by PKop »

cat199 wrote: post #60
PKop wrote: post #27

Earlier quoted context omitted.

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…

> It will give legitimacy to what would have been necessary anyways, and which was likely impossible politically to avoid given sluggish labor and wage growth after decades of equity bull run and growing inequality. what would have been necessary anyway? I'm reading currency devaluation?

Yes.

Re: Yuan falls to 11-year low

#79

Post by Fjolsvith »

hatch_q wrote: post #69
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…

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 trill…

So they sell treasuries and buy them with dollars. How does this crash the Dollar?
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