Author: abramicus

WHAT REASON FOR PBOC TO KEEP THE YUAN AT 6.20 CNY/USD?   [Copy link] 中文

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Post time 2015-5-22 03:45:59 |Display all floors
abramicus Post time: 2015-5-21 14:00
Float freely, like the USD and Euro?  The same two currencies that have been manipulated by at lea ...

As an importer and exporter in China I know the problems with fluctuating exchange rate but most of our trade has to be done in US$ as that is the only way most international companies will work, not long ago we had over 8 RMB to the dollar, way over the six and a bit we have now but our export business has still increased.

The main reasons for the FC reserves going down is firstly the amount of money invested overseas by Chinese people and the increase in expensive luxury imports. Most of the lost manufacturing is down to labour intensive industries moving away due to the huge wages increases in China in the last few years

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Post time 2015-5-22 15:17:21 |Display all floors
futsanglung Post time: 2015-5-22 03:45
As an importer and exporter in China I know the problems with fluctuating exchange rate but most o ...

Didn't realize you are such a good apologist for the Economic Hit Men who are steering China, Inc., toward stagflation.

You mention that you are doing more business, making more profits, with an overvalued Yuan exchange rate of 6.20 Yuan/Dollar, compared to when the exchange rate was 8.00 Yuan/Dollar, but all things being equal, your statement is a mathematical IMPOSSIBILITY.  The only way you can claim to have made more money exporting with an overvalued Yuan exchange rate is if you have offsetting imports which may benefit you as a firm, but which drains the public treasury, i.e., the foreign currency reserves of the PBOC, faster than ever before, as you can now import $1 of goods with 6.20 Yuans, whereas before you had to pay the PBOC up to 8.00 Yuans.  Roughly, your imports were subsidized by the PBOC by 29%, using China's hard earned foreign currency reserves, all for nothing, except to make you rich, i.e., the importers and their foreign suppliers.

Your next point that the reason the foreign currency reserves of China is dropping is because of China's investments abroad lacks numerical proof.  This is just a conjecture, because you have to prove that the amount invested abroad exceeds the trade balance surplus of China by the same amount that China's foreign currency reserves have decreased.

Your third point, that the increase in expensive luxury imports again suffers from lack of numerical basis.  The total imports of China actually dropped such that even if luxury imports increased, it could not have caused the total foreign currency reserve of China to drop by some 300 billion, plus another 200 billion of lost export earnings.

All in all, your arguments sound convincing only when you do not assign numbers to your variables.  Once you do, you realize that your conclusion about other reasons for the crop of China's foreign currency reserves are MATHEMATICAL IMPOSSIBILITIES.

In fact, by INDIRECT PROOF, you have lent support to my thesis, that the reason for the drop in China's foreign currency reserves is because of the iniquitous and criminal effects of its self-imposed overvalued Yuan Exchange Rate of 6.20 CNY/USD, which must be corrected by an act of political decision from the State Council, which can no longer hide behind the veil of the PBOC that is its responsibility to supervise and direct for the benefit of the nation's well-being.



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Post time 2015-5-22 17:41:16 |Display all floors
abramicus Post time: 2015-5-22 15:17
Didn't realize you are such a good apologist for the Economic Hit Men who are steering China, Inc. ...

Our business has increased due to changes in the way we do business, we now supply more value added products and less products that are made by cheap labour.

Exports generally have declined due to a downturn in the world economy, if others can not but then you can not sell, basic economics.

Nearly every country in the world manages fine with a freely floating currency, why should China be different.

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Post time 2015-5-26 10:50:01 |Display all floors
futsanglung Post time: 2015-5-22 17:41
Our business has increased due to changes in the way we do business, we now supply more value adde ...

China should let it its exchange rate float downward, as it will definitely do if the PBOC stops meddling with it, and keep up its buying of Yuans wasting hundreds of billions of dollars of hard earned foreign currency reserves, and at the same time forfeiting hundreds of billions of dollars of export earnings due to the artificial overpricing of Chinese products abroad in dollars and at home in Yuans.  This double whammy is made twice as bad for the Chinese economy when Japan is devaluing the Yen (go criticized Japan if you really care about letting the Yen float freely), transferring the earnings of Japanese investments in China back to Japan with more dollars taken from the PBOC, and transferring the forfeited export earnings of Chinese manufacturers to Japanese exporters.

This smacks of high treason, and probably goes beyond the PBOC.

All the while, China's manufacturing PMI for a third month came below the benchmark of 50 that separates manufacturing growth from contraction, at 49.1 for May 2015, and already two major corporations have defaulted on their loans because their income had shrunk due to decreased foreign and domestic earnings of their own company, or of the domestic companies that borrowed from them.

Even Bernanke in his recent speech in Shanghai had to tell his hosts the truth that the FIG LEAF of China joining the four reserve currencies (dollar, euro, yen and pound) is a matter of PRIDE AND IMAGE, and will not change the standard of living of the Chinese people - will not advance the China Dream at all - and may in fact replace it with a nightmare of factory closings, bank failures, rising unemployment, and if the the full range of band aids are applies, such as lowering the interest rate and the bank reserve ratio, accelerating inflation as well, called 'STAGFLATION' that brought the America under Carter to its knees.

Bloomberg reported:

"“When opening the capital account you need to make sure the economy is strong enough to handle the fund flows out,” Bernanke said. “An open account is a two-edged sword” and a drop in the currency could cause panic and an exodus of money, he said . . . China’s desire to make the yuan a SDR currency is for “pride and image”, Bernanke said. “If the yuan becomes an SDR currency it won’t have any effect on the average Chinese. It’s mainly symbolic.”"

THIS IS THE MESSAGE ONE CAN READ BETWEEN THE LINES:  Once China opens the capital account, there will be a devaluation as there has to be because the present exchange rate of the Yuan is supported by China buying up Yuans with its dollars, not the world's banks and businesses buying up Yuan with their dollars, which will lead to an exodus of dollars out of China, that will cause panic in the Chinese bond and stock markets, in effect freezing up all liquidity

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Post time 2015-5-26 11:05:02 |Display all floors
futsanglung Post time: 2015-5-22 17:41
Our business has increased due to changes in the way we do business, we now supply more value adde ...

You can continue to make the case that your business thrives with a higher Yuan exchange rate, but no exporter has the same experience as you, and thus, your argument by example fails for the simple reason that your example, yourself, is untrue.

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Post time 2015-6-1 08:44:02 |Display all floors
This post was edited by abramicus at 2015-6-1 08:50

DESPITE A CONTRACTING MANUFACTURING INDEX OF 49.1, THE YUAN EXCHANGE RATE CONTINUES TO RISE TO 6.19 CNY/USD ON JUNE 1, 2015 - WHO IS WATCHING THE FOX IN THE CHICKEN KOOP?

PBOC is speeding up the contraction of China's economy, just as China's demands for the defense of its islands in the South China Sea and for the building of the Silk Road and Belt are rapidly escalating.

What good are monetary policy makers if they only care about the image and pride of being awarded by a foreign institution the title of "IMF reserve currency", rather than the country their currency is supposed to serve?

They should apply for posh jobs in the IMF and Western banks, rather than work for the ordinary folks and factory workers of China.

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Post time 2015-6-1 17:15:38 |Display all floors
This post was edited by abramicus at 2015-6-1 17:16

MAY MANUFACTURERS PMI CAME BELOW 50 AGAIN - AT 49.2 - TIME FOR SOMEONE TO RESIGN?

The HSBC Manufacturers PMI index came below 50 for the third straight month with a 49.2 in May.  Official statistics came out above 50 at 50.2.  Decide which you want to trust!

The stock market has turned into nothing more than a gambling casino betting on whether the PBOC will lower interest or reduce the bank reserve ratio, either of which will push bond holders into the stock market, resulting in a price increase due to increased demand.

Is this the "New Normal"?

If it is, it is definitely new, it is definitely normal, but it is also definitely bad for Chinese factories, Chinese workers, Chinese homeowners, and eventually, the entire Chinese people.

Lowering interest rate or reducing bank reserve ratios are however NOT the solution, because they merely transfer the losses of the manufacturing sector and export market onto the shoulders of the saving public through inflation, which in the face of loss of jobs, loss of homes, would mean loss of ability to even put food on the family table, as the purchasing power of the savings of the workers is also reduced, by inflation.

The solution is for the PBOC to stop acting as an agent of the IMF in strangling the manufacturing sector of China through overvaluation of the Yuan, caused by its buying Yuans with the people's dollar reserves.  Once this reckless purchasing of Yuans with hard-earned dollars ends, the Yuan will automatically devalue, without having to lower interest rates or reduce reserve ratios, saving the country from inflation, while at the same time stopping its economic contraction.  The bonus is, China saves itself the expense of using up hundreds of billions of its foreign currency reserve buying Yuans, which it could print for pennies on the dollar.  With such a clear cut winning strategy, failure to adopt it cannot be construed as anything but high treason.





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