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The HSBC Markit Flash PMI on China's manufacturing on November 20, 2014, came to an ominous 50.0, below which China's manufacturing would be technically expected to have 0% growth. Such pathetic leadership of the economy by the PBOC should have been overhauled long ago. To patch up its incompetence, on November 21, 2014, the PBOC cut interest rates, and the stock market rebounded, for a short while. |
The Western media immediately focused on the question of how many more rate cuts the PBOC will have to make before the end of the year, or before summer of 2015, as if that were the real key to the manufacturing recession of China.
No, no, and no!
Lowering the interest rate does not solve the problem.
Stopping the PBOC from using China's foreign currency reserves to buy up the Yuan is the real solution! The Yuan has NO REASON WHATSOEVER to keep appreciating when every indicator of its economic growth is going south. Even the net foreign currency reserve of China has been DROPPING, so how can foreigners be rushing in to buy up the Yuans to raise it to its extreme levels of 6.10 that just happened two weeks ago? If foreigners are buying up the Yuans, China's net foreign currency reserve should be rising. Instead, it dropped by more than 100 billion dollars between September and October! The numbers do not lie. The drop in China's foreign currency reserve in the context of the Yuan revaluing to its highest level in more than a decade points to the PBOC as the manipulator of its rise, most likely therefore, through wasting China's hard earned foreign currency reserve to buy back Yuans that it could have simply printed for 0.001% of the dollars used to buy them up.
THE PEOPLE'S BANK OF CHINA SHOULD BE STOPPED FROM GIVING AWAY CHINA'S HARD EARNED FOREIGN CURRENCY RESERVE TO FOREIGN COUNTRIES, ESPECIALLY JAPAN, WHICH IS DEVALUING ITS CURRENCY WHILE THE PBOC IS REVALUING IT UPWARDS. THIS IS THE PERMANENT SOLUTION TO THE SELF-INFLICTED MANUFACTURING RECESSION HITTING CHINA, NOW PUSHED TO THE EDGE OF THE PMI PRECIPICE OF 50.0!