Chinese Economics Thread

[localizer]

Keeping a currency within a trading band is not manipulation? Intervention when currency fluctuates excessively is not manipulation?

Advisors such as Kudlow should be paid by Trump directly is all he does is be a cheerleader and not give a shit about the global economy.

 

[zgx09t]

Exchange rate systems and currency manipulation are separate and totally different matters.

 

[Jura The idiot]

now I read this Opinion: U.S. labeling China currency manipulator reckless
Xinhua| 2019-08-07 00:07:43

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The recent weakening of the Chinese currency beyond 7 yuan per U.S. dollar is caused by factors including Washington's unilateral and protectionist measures, as well as the expectation of additional tariffs on Chinese goods for U.S. markets.

Ignoring market signals and economic common sense, the U.S. Treasury Department on Monday designated China as a currency manipulator.

After Washington announced plans to impose an additional 10 percent tariff on 300 billion U.S. dollars worth of Chinese goods starting Sept. 1, global financial markets were rattled, stirring turbulence in the foreign exchange markets.

The recent weakening of the Chinese currency beyond 7 yuan per U.S. dollar is caused by factors including Washington's unilateral and protectionist measures, as well as the expectation of additional tariffs on Chinese goods for U.S. markets.

Only a little over two months ago, the U.S. administration concluded that no major trading partner of the United States met the standard of currency manipulation last year.

Monday's abrupt shift in stance came ahead of the U.S. Treasury's update of its semi-annual report on international exchange rate policies, which is expected in the fall, and many believe that Washington's maneuver against China is another attempt to pressure China into submission by trade hawks in Washington.

So far, China's central bank, the People's Bank of China (PBOC), has reiterated that it is confident in its capability to keep the yuan's exchange rate basically stable.

Instead of going out of its way to support the value of the yuan above the symbolic seven-to-one threshold, the PBOC allows the yuan's exchange rate to fluctuate in response to market forces, demonstrating its steadfastness to deepen exchange rate reform and also its confidence in the yuan's long-term stability.

Despite weakening against the U.S. dollar, the yuan remains basically stable and strong against a basket of currencies, with the China Foreign Exchange Trade System yuan exchange rate composite index up 0.3 percent since the start of this year.

Moreover, the yuan's recent depreciation against the U.S. dollar was much smaller than those of the Korean won, the Argentine peso and the Turkish lira, making it a relatively stable currency among the emerging markets, and even stronger than reserve currencies such as the euro and the pound.

Viewed from a long-term perspective, the yuan has strengthened 20 percent against the U.S. dollar over the past two decades, the strongest among major currencies in the world, according to calculation by the Bank for International Settlements, an international financial institution headquartered in Basel, Switzerland.

Looking forward, the yuan's exchange rate is buoyed by China's sound fundamentals, strong economic resilience, stable fiscal position, controllable financial risks, balanced cross-border capital movement and sufficient foreign exchange reserves, as stated by the PBOC, which is capable of cracking down on short-term speculation and stabilizing future market expectations.

China will remain committed to its promises on exchange rates made at all Group of 20 summits and abide by a market-determined exchange rate system, said PBOC Governor Yi Gang, who added that the country, refusing competitive devaluation, will not resort to exchange rates in handling external uncertainties such as trade disputes.

Labeling China a currency manipulator for political purposes is as reckless as it is irresponsible. It would further intensify the already high-flying U.S.-China trade tensions and inject new uncertainties into the global financial markets.

As the world's largest economy and the country which issues the major reserve currency, the United States should assume the responsibility of safeguarding the international financial and monetary system, and sustain the hard-won recovering momentum to prevent more global financial turbulence and economic downturns.

 

[Jura The idiot]

now the SCMP story of China’s exporters will be forced to downsize, cut jobs, relocate if Trump follows through with tariff threat

• Last week US President Donald Trump issued a threat to impose new 10 per cent tariffs on US$300 billion worth of Chinese goods on September 1
• US-China trade war forcing firms to consider Vietnam, Indonesia and India with 25 per cent tariffs already in place on US$250 billion worth of Chinese imports

Updated: 8:56am, 7 Aug, 2019

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Traditional export manufacturers in China’s Pearl and Yangtze River Delta regions already struggling under the weight of existing tariffs levied by the Trump administration expect the new tariffs on US$300 billion of Chinese imports to cause their businesses to shrink, force them to lay off workers, and for some, speed up relocation plans.

Fears run deep that the trade war between China and the United States will last for several years, with tariffs truces like the one agreed between President Xi Jinping and US counterpart Donald Trump in Japan at the end of June only causing uncertainty followed by an abrupt escalation in tensions.

Last week, with 25 per cent tariffs already in place against US$250 billion worth of Chinese imports,

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a threat to impose new 10 per cent tariffs on US$300 billion worth of Chinese goods.

The new tariffs, set to take effect on September 1, will largely target consumer products, including toys, smartphones and other electronic devices after trade talks in Shanghai at the end of last month produced too little in terms of concessions from China, according to Trump.

“Our smart helmets are not yet on a tariff list, but may be tariffed at any time. We finally had to start a relocation plan last month,” said Norman Cheng, owner of Strategic Sports, a leading bike, motorcycle and extreme sports helmet production company backed by Hong Kong investors that has been producing in Dongguan, Guangdong province, since the 1990s.

“Because of the uncertainty, we need a full backup plan to deal with possible tariffs, since many of our American customers are constantly worried and keep asking us what’s our response plan.”

Cheng bought land in

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in October, but only decided to build the facility near Ho Chi Minh City in June, with production set to begin in the third quarter of 2020.

“Our factory in Vietnam is not likely to be a 10-year plan. Now it is very different from the past. It becomes very uncertain and changes a lot every month,” he added.

The new round of US tariffs will greatly affect many toys and shoe manufacturers in China, according to Chai Kwong-wah, deputy head of the Hong Kong New Territories General Chamber of Commerce, which has 12,000 members, many of whom run manufacturing businesses in China.

“According to what we know, the sizes of many labour-intensive toy [original equipment manufacturing] factories in Guangdong are shrinking, and a large number of their suppliers, mostly private small businesses, have already closed down because of [the impact of US] tariffs,” Chai said.

Chai ran a two-decade-old toy factory in Shenzhen making Hello Kitty products for Japan and Disney dolls and animals for the US and Europe before moving his business to Vietnam in 2015.

“Toy factories that once had 2,000 or 3,000 workers in Guangdong have now shut down in Dongguan or Shenzhen and hired more than 10,000 workers in Indonesia or Vietnam, and a large and growing number of American buyers are placing orders there,” Chai added.

Analysis by

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released at the start of June, showed that Vietnam was the biggest winner from the shift in supply chains caused by the nearly year-long trade war between China and the US, with the economy of the Southeast Asian nation having been boosted by almost 8 per cent.

“For our factories in India and Vietnam, our procurement from suppliers there has become more and more mature. Therefore, even if made-in-China footwear products are subject to tariffs, we already have room to adjust and transfer production out of China to offset the possible duty.” said a female senior executive of a Taiwan-owned footwear company that has factories in China, India and Vietnam.

But, for downstream suppliers that cannot afford to relocate, they will lose customers and will be forced to cut jobs further, she said.

“Our supply chain in India is not as good as in Vietnam, but because Vietnamese factories are also facing uncertain political and economic possibilities [due to US threats to impose sanctions], we are paying more and more attention to increasing the capacity of our Indian factory,” added the executive who declined to give her name.

Cheng from Strategic Sports said he had considered moving operations to the US, “but there are no proper workers there to hire at all, nor do we have suppliers to support us”.

“Going to Indonesia, it is easier to hire workers, but the supply chain lags far behind Vietnam. In Vietnam, there is a shortage of workers and there is also uncertainty [about possible US tariffs],” he said. “So there is no place or choice that is the best, we can only say that we can’t rely on staying in China, we must go forward.”

For hi-tech companies operating in niche areas where customers are not price sensitive because of the irreplaceable nature of their products, the tariff burden is likely to be transferred to their US buyers.

Several electronics producers said that they would be able to cope with the new 10 per cent duties, although they admitted a concern that the uncertainty will undermine overall market confidence.

“Almost all consumer drones are made in Guangdong and so far there are not any alternative factories in any Southeast Asian countries at which American buyers can place orders,” said Aaron Zhang, founder of Simtoo Intelligent Technology which exports up to 50,000 drones annually, mostly to the US market.

“Drones made in China are still competitive in overseas market because of major price and technology advantages. It’s not hard for us and our buyers to offset the [US] tariff. But because of the uncertainty, one of our biggest buyers, which used to order 20,000 drones once a year, has now started to place orders of 2,000 once a month.”

But the endless anticipation of the latest developments in the trade war, as well as the changing

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and threat of a currency war, is a constant headache, he added.

“Staying alert, shrinking the size of the business and keeping capital flowing has become the common theme among many of Shenzhen’s electronic product suppliers,” said Joe Pan, one of about 200 suppliers who protested in Shenzhen in July after Shenzhen Costar Smart Technology, once listed on the New Third Board, a Chinese equities exchange, suddenly shut down with outstanding debts to suppliers of up to 80 million yuan (US$11.4 million).

“We set up a WeChat group and shared a list of tech companies that have had problems paying suppliers. And the list is becoming longer.”

 

[Jura The idiot]

now the GlobalTimes, kind of informative:
Is there room for future monetary easing in China amid global economic uncertainty?
Source:Global Times Published: 2019/8/6 18:38:42

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Amid increasing external uncertainty, slowing global economic growth, the Fed's interest rate cut and continuing downward pressure on the Chinese economy, the market is looking to see China further ease its monetary policy. How much room is there for monetary easing in China?

Since this year, the rhetoric from monetary authorities on policy has been split. One path is to continue counter-cyclical adjustments, while the other is to implement counter-cyclical adjustments in a timely and appropriate manner. It is not hard to discern that the latter course indicates authorities are somewhat reserved on counter-cyclical adjustments. The change in official tone signifies that although there is room for monetary policy easing, it is subject to a series of factors.

Since the start of 2018, China's central bank has enacted five overall and structural cuts to reserve requirement ratio (RRR), reducing the average bank deposit reserve ratio to 11 percent, about 3 percentage points lower than the 2017 average. Meanwhile, the central bank has used various open market tools to increase short- and medium-term liquidity and drive down interest rates. As a result, market liquidity has been maintained sufficiently, and even quite abundantly at certain stages.

By the end of 2018, supplies of narrow money (M1) and broad money (M2) grew 1.5 percent and 8.1 percent year-on-year, respectively. By the end of June this year, the growth rates for M1 and M2 rebounded to 4.4 percent and 8.5 percent.

Considering that the growth in nominal GDP has slid to 8.3 percent, the growth rate of M2 is basically matching nominal GDP. Moreover, the monetary multiplier has recorded a big change, climbing from a low of 5.41 during the second half of 2018 to 6.14 in June 2019, a historical high. Apparently, it is inappropriate to further loosen monetary policy under such a liquidity situation. Interest rates have continued to fall the domestic market since the second quarter of 2019. The current level of real interest rates is much lower than the level a decade ago. In principle, China's interest rates should be higher than in the US, because the existence of a reasonable interest spread is favorable to maintaining net capital inflows. In this sense, even though the Fed announced an interest rate cut, the space is still limited for interest rate cuts in China.

Except for the relatively stable leverage ratio at the corporate sector, leverage levels of the government and residents have increased since 2018. From the beginning of 2018 to the first quarter of 2019, leverage ratios of the government and residents went up from 35.77 percent and 50.38 percent to 37.67 percent and 54.28 percent, respectively, while the corporate sector only saw leverage ratios decline from 158.9 percent to 156.88 percent. So the overall leverage level increased by about 3.8 percentage points during the same period.

In my opinion, it seems an exaggeration to worry too much about current leverage and debt levels. Some economies, with even higher leverage levels than China, still maintain economic stability for a long time. Nevertheless, the fact that China's macro leverage ratio is indeed relatively high will unlikely cause any fundamental change to its leverage stabilizing policy in the near future, unless the economy comes under major shocks or faces an obvious stall. With the leverage ratio climbing, a further loosening of monetary policy may risk lifting the leverage ratio significantly, which goes against deleveraging or stabilizing leverage policies.

With weakening internal and external demand, the economy faces downward pressure, and with the current account surplus declining, depreciation may still be the main risk to the yuan exchange rate in the future. As monetary policy is an important factor, sometimes even a decisive factor, affecting the exchange rate movement, a loose monetary policy will inevitably put depreciation pressure on the yuan. Thus, for the sake of keeping the yuan exchange rate basically stable and reducing depreciation pressure, authorities are not advised to further loosen the monetary policy easily.

All in all, China's nominal interest rate and real interest rate are currently both at low levels from the perspective of history and the world market. So further cutting interest rates sharply may only produce a limited effect, and such a move is subject to multiple factors.

Meanwhile, the current required RRRs at banks have generally reached an average of 11 percent after several downward adjustments, which is already quite low in the international market, representing limited room for any further slash.

Nevertheless, it is still possible to loosen monetary policy appropriately if the macro economy suffers any major setback in the future. With the advance of interest rate marketization, the use of price-based tools will gradually become the main approach for adjusting monetary policy.

 

[Jura The idiot]

now I read
China Focus: China's forex reserves stand at 3.1037 trln U.S. dollars at end of July
Xinhua| 2019-08-07 21:40:49

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China's foreign exchange reserves came in at 3.1037 trillion U.S. dollars at the end of July, official data showed Wednesday.

The amount increased by 31 billion U.S. dollars, or 1 percent from the beginning of 2019, according to the State Administration of Foreign Exchange (SAFE).

It went down slightly from 3.1192 trillion U.S. dollars at the end of June, ending a two-month rising streak.

The exchange rates of major currencies against the U.S. dollar fell in July while global bond indices went up as the result of various factors including the global trade situation, monetary policies of central banks and geopolitics, said SAFE spokesperson Wang Chunying.

Wang said the forex reserves decline in July was normal fluctuation considering stable cross-border capital flows and balanced supply and demand in China's forex market.

"The U.S. dollar index surged nearly 2.5 percent in July, leading to substantial depreciation of major non-U.S. dollar currencies and the monthly decline in China's forex reserves last month," said Zhao Qingming, chief economist of a research institute under the China Financial Futures Exchange.

The balance of cross-border capital flows and the rising asset prices due to the Fed rate cut partly offset the negative influence on China's forex reserves by a strong U.S. dollar, Zhao added.

Wang said the forex regulator would maintain the continuity and stability of forex policies and continue to open up the country's financial sector.

China has a world-leading bond and stock market in terms of their size, yet foreign investment accounts for only 2 percent and 3 percent, respectively, leaving plenty of room for future growth, said Wang.

"We will continue to build a sound investment environment for overseas investors, including those from the United States, to invest in renminbi assets," she said.

Wednesday's data also showed China's gold reserves rose for an eighth straight month in July to 62.26 million ounces, up 320,000 ounces month on month.

The reserves were valued at 88.88 billion U.S. dollars at the end of July, compared with 87.27 billion U.S. dollars at the end of June.

 

[Gatekeeper]

The self-anointed policeman of this forum is breaking the rules himself. Is this some spin that the silence is because people can't counter against those arguments so then the other side can feign victory when members have been muzzled from talking about the trade war? That's the way it's always been. Stifle other perspectives so that only one is out there so therefore convince yourself it must be right because no one is able to argue against it.

j

Lol, couldn't agree more. The trade war thread is the best thing that happen to this forum. It keeps it going while we all waiting for something to happen in the hardware front.

Let's not forget, this is a Sino"defence" forum, so this means defence in all apect of China's intetest, military or otherwise.

I found these threads very stimulating and engaging. Yes, there's the inevitable political contents, but on the whole, ALL members treated each other with respect!

It just that certain members here can't stand to hear what others have to say. (they seem to forget that they do not have to read the thread they don't like)!

Since the closure of these threads, its not worth me visting this forum as much as I use to.

Just my two cents worth, that's all

 

[Jura The idiot]

now I read
China keeps door open to September talks in Washington, despite trade war escalation

• Wei Jianguo, a former vice-minister of commerce, says the meeting is likely to happen as planned
• Source briefed by the US government said video conferences are planned to lay the groundwork for the next round of face-to-face talks

Updated: 12:42am, 8 Aug, 2019

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Despite the significant escalation in tensions between China and the United States this week, negotiators are still expected to convene in Washington in September for another round of trade talks, sources have said.

The next face-to-face negotiations are “likely to happen as planned”, even though the prospects of a deal are dim, according to Wei Jianguo, a former vice-minister of commerce responsible for foreign trade.

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that “it is possible that the meeting could ease the tensions a bit on some aspects”, but declined to elaborate further.
Wei’s comments to the South China Morning Post echoed those of Larry Kudlow, US President Donald Trump’s top economic adviser, who hours earlier said he still expected Chinese negotiators to visit the US for another round of talks.

“The president and our team is planning for a Chinese visit in September,” Kudlow told CNBC in an interview on Tuesday. “We’re willing to negotiate. Movement towards a good deal would be very positive and might change the tariff situation. But then again, it might not.”

China’s Ministry of Commerce did not immediately reply to a faxed request for a response to Kudlow’s comments.

However, a source who has been briefed on trade talks by the US government said that video conferences are scheduled this month, to lay the groundwork for revisiting substantive issues in a face-to-face setting in September.

“It will be interesting to see if the Chinese will still decide to travel to the US next month,” said the source, who wished not to be identified.

The current Chinese vice-minister for commerce, Wang Shouwen, a pivotal member of China's trade negotiating team, has appeared at a series of public events in recent days but declined to comment on whether the talks will go ahead.

At a press conference on the expansion of the

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on Tuesday, Wang declined to respond to a question on potential countermeasures Beijing could take in retaliation to Trump’s tweet on new tariffs.

“The question goes beyond the topic of the press conference and we will have other more suitable occasions to talk with you,” Xi Yanchun, a spokeswoman for the State Council Information Office, told a reporter from Commercial Radio Hong Kong, who asked the question.

Negotiators led by Vice-Premier Liu He had been planning to fly to Washington after talks in Shanghai failed to yield a deal, but Trump’s tweet on a new tariff raised questions on whether the trip would go ahead.

If Liu were to take part in further talks, it would be viewed by some as a sign that both sides were keen to avoid an all-out trade war, despite the significant escalation in trade tensions over recent days.

Since the

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last week, tensions have mounted between the world’s two biggest economies after Trump threatened to impose a 10 per cent tariff on US$300 billion of Chinese products from September 1, a threat that came just a day after talks finished.

China responded by suspending purchases of American agricultural products and

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to weaken beyond the key level of seven to the US dollar on Monday.

In retaliation, the US Treasury Department officially labelled China a currency manipulator, a move which trade lawyers say could pave the way for additional tariffs and sanctions.

However, despite the escalation, neither side has officially withdrawn from September’s talks, although details such as the date or venue have not yet been disclosed.

Another meeting between top negotiators, including US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer, as well as China’s Commerce Minister Zhong Shan, may offer some relief to global markets, which were roiled by the currency dispute this week, since it would suggest that both sides are still committed to talking.

After Trump announced an increase in tariffs on US$200 billion of Chinese products to 25 per cent in May, a Chinese trade delegation

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, a trusted economic aide to President Xi Jinping, still flew to Washington as planned.

Trump and Xi met on the sidelines of the G20 leaders summit in Osaka at the end of June, agreeing to a trade war truce. However, the truce only lasted for a month, as Trump complained that China was not buying US farm products as he claimed Xi had promised in Japan.

so let's wait and see

 

[Gatekeeper]

Keeping a currency within a trading band is not manipulation? Intervention when currency fluctuates excessively is not manipulation?

There's no such thing as "currency manipulator"! Period!

All country "manages" their currency in accordance to their country's need. Look what happened to the UK in their devaluation of the sterling in the 60s and 70s. Also, look what happened to the inflation inducement countried of Italy and Greece that sacraficed their curencies external value inorder to pay for public services (due to the inabilities of the tax systems)

When all these is happening, you don't hear the USA ever complaining about it. This is because it's a country's sovereign right to set a price for their currency. After all, if you don't like it, you don't have to buy it!

So the term currency manipulator is purly a term invented by the USA to try to brand some country as a bad actor in order for them to justify their punishment!

And as this is not enough, I read today from Bloomberg I think. That the US accused China of Manipulating its currency, because,......... wait for it.......
China didn't do ENOUGH to INTERVENE in the financial market to stop its currency sliding!

Lol, isn't intervention manipulation???
You can't make it up!

 

[localizer]

There's no such thing as "currency manipulator"! Period!

All country "manages" their currency in accordance to their country's need. Look what happened to the UK in their devaluation of the sterling in the 60s and 70s. Also, look what happened to the inflation inducement countried of Italy and Greece that sacraficed their curencies external value inorder to pay for public services (due to the inabilities of the tax systems)

When all these is happening, you don't hear the USA ever complaining about it. This is because it's a country's sovereign right to set a price for their currency. After all, if you don't like it, you don't have to buy it!

So the term currency manipulator is purly a term invented by the USA to try to brand some country as a bad actor in order for them to justify their punishment!

And as this is not enough, I read today from Bloomberg I think. That the US accused China of Manipulating its currency, because,......... wait for it.......
China didn't do ENOUGH to INTERVENE in the financial market to stop its currency sliding!

Lol, isn't intervention manipulation???
You can't make it up!

Either no one is or everyone is a currency manipulator.
We stopped using precious metals and just went to printing paper.