China's yuan slides in value after Beijing alters controls

[webfact]

China's yuan slides in value after Beijing alters controls
By JOE McDONALD

BEIJING (AP) — China devalued its tightly controlled currency on Tuesday following a slump in trade, triggering the yuan's biggest one-day decline in a decade.

The central bank said the yuan's 1.3 percent fall was due to a change aimed at making its exchange rate controls more market-oriented. But any change raises the risk of tensions with China's trading partners.

The yuan has strengthened in recent months along with the dollar, making Chinese exports more expensive and raising the risk of politically dangerous job losses in industries that employ millions of workers.

July exports fell by an unexpectedly large margin of 8.3 percent from a year earlier.

The yuan, also known as the renminbi, is allowed to fluctuate in a band 2 percent above or below a rate set each day by the People's Bank of China based on the previous day's trading. On Tuesday, the center of the trading band was set 1.9 percent below Monday's level in what the central bank said was a one-time move to reflect market conditions.

Tuesday's change was the biggest one-day decline since Beijing ended the yuan's direct link to the U.S. in July 2005 and switched to basing the exchange rate on a basket of foreign currencies. The composition of that basket is secret but the dollar appears to dominate it, which means the yuan has been rising even as the currencies of other developing countries fell.

The United States and other governments complained for years that Beijing suppressed the yuan's exchange rate, giving its exporters an unfair price advantage and hurting foreign competitors.

Such arguments have diminished as the yuan's value rose, but Washington and others still are pressing Beijing to allow the market to set its exchange rate.

"This complex situation is posing new challenges," said a central bank statement. It said the yuan's strong exchange rate is "not entirely consistent with market expectation" and therefore it was a good time to adjust controls to help development of the foreign exchange market.

It promised to keep the exchange rate "basically stable" but said market forces would be given a bigger role, which left open the possibility of more declines in the yuan's value.


-- (c) Associated Press 2015-08-11

[Scott]

Will this have any affect on the Thai Baht?

[Publicus]

The yuan had been appreciating while most other Asian currencies to include the baht were depreciating, so the CCP Boyz in Beijing have joined the pack to begin depreciating.

Several bolts of lightening are striking the same place simultaneously which can only happen in China.

The 8.3% yoy drop of exports is ghastly bad news given the forecast of a 1,5% fall. Devaluation was the only way to address it.

Yet for every point of devaluation, $40 billion of capital flows out, and capital has been fleeing the country the past 18 months. The CCP Boyz are using their huge forex reserves to cover the yuan in trade and the losses in capital. So the Boyz had already expended $400 billion of forex reserves this year, which is a major and significant development.

Everyone's expecting the Boyz will have to reduce bank reserve ratio requirements and lower interest rates again pretty soon. It's pretty much now an official laffer that economic growth will be the 7% the Boyz had predicted going in to this year. It will be officially in the range of 6.8% or so but by realistic calculations more like 5.0% (or less).

Last week the IMF delayed a recomendation on including the yuan in the SDR basket of reserve currencies because of the complications involved. When international bankers in Switzerland say it's too complicated we can know the whole thing is such a mess nobody wants to touch it with a ten-foot bamboo pole. The yuan devaluation by the CCP Boyz and their promise to make the yuan more market reflective is also an attempt to crawl into the IMF basket of SDRs when the IMF finally decides in October, a decision the US can veto.

And with the Boyz doing all the recent buying of stock equities in the crashed markets of Shanghai and Shenzhen, the party's People's Bank of China is now the largest stockholder of the country's stock exchanges, loaded down with stocks it can't sell but paid full value for.

Btw, deflation officially began in the CCP China during Q1.

The daze of big economic growth in the CCP China are history, brief and artificial as they were. All the numbers are going down and keep sliding down...down...down....

Edited August 11, 2015 by Publicus

[Graemej100]

Will this have any affect on the Thai Baht?

Not on your Nellie! The Thai baht is never effected by any financial crisis, or any downturn in any economy - anywhere. It must be the most stable currency in the world, by a long distance.

[Time Traveller]

The yuan had been appreciating while most other Asian currencies to include the baht were depreciating, so the CCP Boyz in Beijing have joined the pack to begin depreciating.

Several bolts of lightening are striking the same place simultaneously which can only happen in China.

The 8.3% yoy drop of exports is ghastly bad news given the forecast of a 1,5% fall. Devaluation was the only way to address it.

Yet for every point of devaluation, $40 billion of capital flows out, and capital has been fleeing the country the past 18 months. The CCP Boyz are using their huge forex reserves to cover the capital losses and the Boyz have already expended $400 billion of forex reserves this year, which is a major and significant development. (Each 1% of yuan devqaluation takes 3 months to work through the economy.)

Everyone's expecting the Boyz will have to reduce bank reserve ratio requirements and lower interest rates again pretty soon. It's pretty much now an official laffer that economic growth will be the 7% the Boyz had predicted going in to this year. It will be officially in the range of 6.8% but by realistic calculations more like 5.0% (or less).

Last week the IMF delayed a decision on including the yuan in the SDR basket of reserve currencies because of the complications involved. When international bankers in Switzerland say it's too complicated we can know the whole thing is such a mess nobody wants to touch it with a ten-foot bamboo pole. The yuan devaluation by the CCP Boyz and their promise to make the yuan more market reflective is also an attempt to crawl into the IMF basket of SDRs when the IMF finally decides in October, a decision the US can veto.

And with the Boyz doing all the recent buying of stock equities in the crashed markets in Shanghai and Shenzhen, the party's People's Bank of China is now the largest stockholder of the country's stock exchanges, loaded down with stocks it can't sell but paid full value for.

Btw, deflation officially began in the CCP China during Q1.

The daze of big economic growth in the CCP China are history, brief and artificial as they were. All the numbers are going down and keep sliding down...down...down....

It just means more Chinese money will be flowing into UK/Australian/Canadian and USA real estate.

And I think there will be more devaluations to come for the RMB

[Publicus]

The yuan had been appreciating while most other Asian currencies to include the baht were depreciating, so the CCP Boyz in Beijing have joined the pack to begin depreciating.

Several bolts of lightening are striking the same place simultaneously which can only happen in China.

The 8.3% yoy drop of exports is ghastly bad news given the forecast of a 1,5% fall. Devaluation was the only way to address it.

Yet for every point of devaluation, $40 billion of capital flows out, and capital has been fleeing the country the past 18 months. The CCP Boyz are using their huge forex reserves to cover the capital losses and the Boyz have already expended $400 billion of forex reserves this year, which is a major and significant development. (Each 1% of yuan devqaluation takes 3 months to work through the economy.)

Everyone's expecting the Boyz will have to reduce bank reserve ratio requirements and lower interest rates again pretty soon. It's pretty much now an official laffer that economic growth will be the 7% the Boyz had predicted going in to this year. It will be officially in the range of 6.8% but by realistic calculations more like 5.0% (or less).

Last week the IMF delayed a decision on including the yuan in the SDR basket of reserve currencies because of the complications involved. When international bankers in Switzerland say it's too complicated we can know the whole thing is such a mess nobody wants to touch it with a ten-foot bamboo pole. The yuan devaluation by the CCP Boyz and their promise to make the yuan more market reflective is also an attempt to crawl into the IMF basket of SDRs when the IMF finally decides in October, a decision the US can veto.

And with the Boyz doing all the recent buying of stock equities in the crashed markets in Shanghai and Shenzhen, the party's People's Bank of China is now the largest stockholder of the country's stock exchanges, loaded down with stocks it can't sell but paid full value for.

Btw, deflation officially began in the CCP China during Q1.

The daze of big economic growth in the CCP China are history, brief and artificial as they were. All the numbers are going down and keep sliding down...down...down....

It just means more Chinese money will be flowing into UK/Australian/Canadian and USA real estate.

And I think there will be more devaluations to come for the RMB

Yes indeed and the yuan will float more freely quick step by quick step devaluing all the while.

This is a big deal that the CCP Boyz in Beijing are doing. I'm not sure they know quite exactly what they are doing because they are accepting not just some risk that this will go bust, but several great risks that experimenting with the currency under present circumstances will crash the economy.

If this is the start of a new yuan regime of floating it, the CCP Boyz would also need to open their capital markets which they have not done. They can't do one without doing the other or everything goes south tout de suite. Yet the CCP firmly resists opening their capital markets because global market makers would determine prices and allocate goods and services rather than the CCP Boyz doing it. That's anathema so the present currency action singularly and alone smacks of a panic.

The economy reformers Xi Jinping and PM Li Kejiang are still losing on the need to switch the economy from its export and infrastructure base to a consumer base built on a continually upgraded household income. Despite three years of high profile purges by Xi of his opponents, the CCP had become firmly embedded in the current scheme of things and it isn't about to ever let go.

The CCP bosses and officials throughout the PRC live large off the real estate bubble, the housing bubble, the bubble in official state banking and the bubble in shadow banking, the loan bubbles of local and provincial governments respectively in their Investment Development Swindles Vehicles, and a massive corruption unprecedented in history.

In respect of the Western real estate referenced in the post, I worked for two separate industrial groups in the CCP China and one owner after another owner said to me that the get rich philosophy of the Chinese entrepreneurial capitalist is to "make it here and use it over there," in reference to earning a fortune in the CCP China and building on it in the West. They ensured their children were born in Hong Kong so the kids could grow up with a dual citizenship prohibited on the Mainland. Dual citizen of Hong Kong and Canada where the family will relocate when the time is right. Dual citizen of Hong Kong and Australia, of Holland, of Sweden, Norway, New Zealand etc. Make the bucks then get out while the gettin's good.

Edited August 11, 2015 by Publicus

[SheungWan]

Will this have any affect on the Thai Baht?

Not on your Nellie! The Thai baht is never effected by any financial crisis, or any downturn in any economy - anywhere. It must be the most stable currency in the world, by a long distance.

I have checked with my Nellie and she pulled a face. In theory a rising Baht against the Yuan should make Thai exports immediately more expensive, so a negative. On the other hand, a more stable Chinese economy exporting more should make more money available down the line to purchase more imports eg Thai foods, so 'er..............................................

[elgordo38]

The yuan had been appreciating while most other Asian currencies to include the baht were depreciating, so the CCP Boyz in Beijing have joined the pack to begin depreciating.

Several bolts of lightening are striking the same place simultaneously which can only happen in China.

The 8.3% yoy drop of exports is ghastly bad news given the forecast of a 1,5% fall. Devaluation was the only way to address it.

Yet for every point of devaluation, $40 billion of capital flows out, and capital has been fleeing the country the past 18 months. The CCP Boyz are using their huge forex reserves to cover the yuan in trade and the losses in capital. So the Boyz had already expended $400 billion of forex reserves this year, which is a major and significant development.

Everyone's expecting the Boyz will have to reduce bank reserve ratio requirements and lower interest rates again pretty soon. It's pretty much now an official laffer that economic growth will be the 7% the Boyz had predicted going in to this year. It will be officially in the range of 6.8% or so but by realistic calculations more like 5.0% (or less).

Last week the IMF delayed a recomendation on including the yuan in the SDR basket of reserve currencies because of the complications involved. When international bankers in Switzerland say it's too complicated we can know the whole thing is such a mess nobody wants to touch it with a ten-foot bamboo pole. The yuan devaluation by the CCP Boyz and their promise to make the yuan more market reflective is also an attempt to crawl into the IMF basket of SDRs when the IMF finally decides in October, a decision the US can veto.

And with the Boyz doing all the recent buying of stock equities in the crashed markets of Shanghai and Shenzhen, the party's People's Bank of China is now the largest stockholder of the country's stock exchanges, loaded down with stocks it can't sell but paid full value for.

Btw, deflation officially began in the CCP China during Q1.

The daze of big economic growth in the CCP China are history, brief and artificial as they were. All the numbers are going down and keep sliding down...down...down....

You pretty well spelled it out. Sadly the west has trade deals with this country and they just go whack and devalue their currency thus making imports cheaper at a time when the Greenback is headed for the stratosphere. This has been a issue since so many western businesses closed shop and moved to China the land of the shackled and the downtrodden. An American manufacturers paradise. This is what happens when you do business with these countries its not a level playing field. You might play by the Marquis of Queensberry rules but with them it business at any cost. They must provide jobs for hundreds of millions and their failing. Wait till the TPP is signed and some of the signatories start playing the same game. What a disaster. And then there is the Iranian deal. Whats the name of that TV game oh yeah "Lets Make A Deal"

Edited August 11, 2015 by elgordo38

[F430murci]

No big surprise here, at least it should not be. China's exports fell by 8.3% in June and the devaluation of the Yuan is an attempt to stimulate exports and try and prop up China's wavering stock market. Closed currency = unfair competition, but they get away with it and American retailers love the cheap products. Chest la vie.

[Ulic]

Not enough to affect Chinese tourists in Thailand.

[jacko45k]

The yuan had been appreciating while most other Asian currencies to include the baht were depreciating, so the CCP Boyz in Beijing have joined the pack to begin depreciating.

Several bolts of lightening are striking the same place simultaneously which can only happen in China.

The 8.3% yoy drop of exports is ghastly bad news given the forecast of a 1,5% fall. Devaluation was the only way to address it.

Yet for every point of devaluation, $40 billion of capital flows out, and capital has been fleeing the country the past 18 months. The CCP Boyz are using their huge forex reserves to cover the capital losses and the Boyz have already expended $400 billion of forex reserves this year, which is a major and significant development. (Each 1% of yuan devqaluation takes 3 months to work through the economy.)

Everyone's expecting the Boyz will have to reduce bank reserve ratio requirements and lower interest rates again pretty soon. It's pretty much now an official laffer that economic growth will be the 7% the Boyz had predicted going in to this year. It will be officially in the range of 6.8% but by realistic calculations more like 5.0% (or less).

Last week the IMF delayed a decision on including the yuan in the SDR basket of reserve currencies because of the complications involved. When international bankers in Switzerland say it's too complicated we can know the whole thing is such a mess nobody wants to touch it with a ten-foot bamboo pole. The yuan devaluation by the CCP Boyz and their promise to make the yuan more market reflective is also an attempt to crawl into the IMF basket of SDRs when the IMF finally decides in October, a decision the US can veto.

And with the Boyz doing all the recent buying of stock equities in the crashed markets in Shanghai and Shenzhen, the party's People's Bank of China is now the largest stockholder of the country's stock exchanges, loaded down with stocks it can't sell but paid full value for.

Btw, deflation officially began in the CCP China during Q1.

The daze of big economic growth in the CCP China are history, brief and artificial as they were. All the numbers are going down and keep sliding down...down...down....

It just means more Chinese money will be flowing into UK/Australian/Canadian and USA real estate.

And I think there will be more devaluations to come for the RMB

Can I get real optimistic and say it might reduce the number of Chinese tourists?

[Srikcir]

Anybody notice that a year after making trade and security agreements with Russia and China, their respective currencies crash?

Or that after Thailand delcared it wanted the BRIC to become the new IMF alternative, the Brazilian Real crashes?

If one believes in superstition, Thailand is not a country to partner with right now.

[craigt3365]

And another 1.6% drop today. Wow....

[natway09]

America has been crying "foul" over this subject for many years, but their "balance of payments to China" are

so bad they know they cannot scream too loud

[Publicus]

Anybody notice that a year after making trade and security agreements with Russia and China, their respective currencies crash?

Or that after Thailand delcared it wanted the BRIC to become the new IMF alternative, the Brazilian Real crashes?

If one believes in superstition, Thailand is not a country to partner with right now.

Thx much for reminding me about the gods who are after all the real masters of the universe.

All the same, after the Fed begins raising interest rates which is expected by the end of the year, the Brics will get a jolt that will slam them sharply down further yet. It is a spiral that will take a decade for the Brics and their statist pals in governments in South America, SE Asia, Africa to slither their way up and out of. They'll be able to gradually get out of it for sure, but only if they make their best efforts by their best people.

The Russian economy btw dropped 4.6% last quarter and the rubble ruble is back --- back up in the mid-60s again and climbing. The Boyz in Beijing know they have the backstop of the USA to enter the dragon to apply first aid after it collapses.