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 2015-6-7 14:37:48 |Display all floors
This post was edited by abramicus at 2015-6-7 14:40
dostoevskydr Post time: 2015-6-7 13:42
"...or the IMF which still insists China's Yuan is undervalued".....

Yuan no longer undervalued, sa ...

WHAT THE IMF REALLY WANTS - TURNING CHINA INTO THE VENTILATOR MAN OF ASIA AGAIN.

1.  The Yuan exchange rate should be overvalued, and REMAIN SO, thereby ensuring that the stranglehold on the manufacturing sector and export earnings of China will forever be maintained, until both contract and die out.

2.  The Yuan should be manipulable by foreign banks and speculators.
     a.  By allowing unlimited volumes of transactions by foreign banks and speculators on the Yuan.
     b.  By letting these same foreign banks and speculators to dominate the market forces fixing the exchange rate of the Yuan, while forbidding the central bank of China, PBOC, from intervening when artificial shortages of either currency are being imposed on the Chinese economy.

For the PBOC and its backers at higher levels to continue to do this to the Chinese economy, the foreign banks and speculators must already have control over the political apparatus of China, as this act of economic Harakiri is entirely self-imposed with the strictest discipline even when the GDP growth rate is falling below 7%, when factories and businesses are so strapped for revenues (their products are overpriced in Yuans at home and in Dollar abroad, so they cannot sell to anyone) that they are on the verge of defaulting on their debts, when banks that lent to these factories and businesses are themselves becoming insolvent - to insist that such cutting off of one's nose to spite one's face - is the way to bring health and prosperity to China, is at best insane and at worst high treason.

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Post time 2015-6-8 17:43:28 |Display all floors
MORE FAILING GRADES FOR CHINA'S ECONOMIC TEAM . . .

With the Yuan exchange rate hovering at an overvalued rate of 6.20 Yuan/Dollar ratio, Chinese products are now overpriced in Dollars, Euros and Yens abroad, and thus her exports have dived another 2.8% in May 2015, the latest statistics show.

Not only that, China's imports fell 18.1%, despite foreign goods now enjoying a lower price in Yuans, and thus are more competitive against Chinese products.  That imports dropped can be due to two factors.  First, the importers got greedy, and kept their prices unchanged from before, such that their profit margins got fatter, but their sales dropped because the average consumer is either experiencing a cut in pay or in hours of work, as his employer is suffering from falling sales, and narrowing profit margins, with coming debt repayments due any time soon.  Second, the Chinese consumer knows that she needs to save even harder, now that China has lost its manufacturing edge, and unemployment is soon to become more widespread.  This fall in imports also proved that China is not exchanging export profits for domestic consumption increases, because both are falling, with consumption of imports falling more than exports.

It is time for the Economic Team of China to either change its consistently erroneous and self-damaging Yuan exchange rate overvaluation (because of the PBOC buying Yuans with its dollar reserves), or to step down as a sign of RESPONSIBILITY to the people they claim to serve.  Authority without accountability is would be irresponsible and contrary to the vision of a New China that was enunciated by Xi.  It would be a reversal to egoistic self-preservation at the expense of the well-being of the people.

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Post time 2015-6-10 00:37:15 |Display all floors
CHINA HAS NO ROOM FOR INACTION

We hear famously the phrase "we have room for action" emanating from the clouds, as if sending more rain to an already flooded plain is the solution to the overcast sky.  There is no room for lowering the interest rate or the banking reserve ratio, because doing either of these will open the floodgates of inflation, but will not save the manufacturing sector, except for a short while, until the inflation of the prices of their raw materials and labor cancel out the inflation of the prices of their products, at which point, the public would have the bear the double burden of paying higher prices for food, clothing, transportation, and housing, while once again facing the prospect of cuts in wages or hours of work.

There is room for only ONE AND ONLY ONE ACTION - devalue the Yuan back to 6.50 CNY/USD by stopping the PBOC from buying Yuans with its foreign currency reserves, IMMEDIATELY.

The Yuan will automatically come down, the noose around the manufacturing sector will automatically loosen, factories will automatically increase their sales, and banks will automatically be paid on time, but most importantly, the hundreds of millions of Chinese men and women who work for a living will automatically have more money to pay for their needs, and more confidence in spending their savings for the few luxuries they labored long for.

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Post time 2015-6-28 05:14:55 |Display all floors
THE PBOC LOWERS COMMERCIAL BANKS IN RURAL AREAS, AGRICULTURE AND SMALL BUSINESS' RESERVE REQUIREMENT RATIO FROM 18.5% TO 18.0%, ONE YEAR LENDING RATE FROM 5.10% TO 4.85%, AND DEPOSIT INTEREST RATE FROM 2.25% TO 2.00%.

This is not proof that the PBOC has "room for action" but rather "room for incorrect action" which only substitutes inflation for loss of national wealth (in the form of what foreign countries owe to China in its exports earnings and its foreign currency reserves), which will CONTINUE TO DROP in spite of these measures, as long as the Yuan exchange rate remains overvalued, such as at the current 6.20 Yuan/USD exchange rate.

But as the rising unemployment and labor strikes continue to worsen, there is really no room for such or more of such incorrect actions.  The manufacturing sector continues to die from exchange rate strangulation, as its products remain overpriced abroad in dollars, euros and yens, and also remain overpriced in yuans at home compared to foreign imports.  When the economy continues to die, and social unrest continues to rise, such actions by the PBOC are worse than useless, because they add inflation to the already worsening manufacturing contraction.  Poison is poison, even it is made sweet.





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Post time 2015-7-1 13:56:06 |Display all floors
NOW EVEN THE WORLD BANK DARES TO LECTURE CHINA ON HOW TO REFORM ITS ECONOMY . . . SINCE WHEN DID THE WORLD BANK BECOME THE ECONOMIC CZAR OF CHINA?

When the government allows the stock market to appreciate by 200% in a year, there has to be something seriously wrong, not just with the stock market, but with its governmental overseers.

Now, the crash landing, 20% in one week, just for starters.

Lowering the interest rate and the banking reserve requirement ratio will not save the Chinese economy unless it lowers the Yuan exchange rate.  Better yet, the PBOC should just lower the Yuan exchange rate, without lowering the interest rate and reserve ratio, which increases the risk of runaway inflation if not carelfullly monitored and controlled.  It can accomplish this quite easily, by simply stopping its buying up of Yuans with its dollar reserves.

China's current economic team is the most dubious one that it has ever gotten in the past 25 years.  They are at least 300 billion dollars in the hole.  And counting.

China has no time to waste in reversing the overvaluation of the Yuan.  A whole country of entrepreneurs and workers are hoping this self-imposed handicap would end.  Either the overvaluation of the Yuan ends forthwith, or China's manufacturing sector is doomed.

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Post time 2015-7-22 15:22:12 |Display all floors
If China is planning to project an image of being more market-responsive, its fixed overvalued exchange rate of the Yuan, still standing at 6.20-6.21 Yuan/Dollar, throughout all the stock market booms and crashes, is proof that NO, THE CHINESE ECONOMIC SYSTEM IS NOT AT ALL MARKET-RESPONSIVE.

But, seeing all the deleterious effects its overvalued Yuan exchange rate has caused - contraction of manufacturing, rising unemployment, decreasing exports and trade balance, decreasing foreign currency reserves, and falling annual GDP growth rates - the current economic system is not only MARKET-UNRESPONSIVE, it is also irrational to the point of being suicidal.

Still, the country continues its march over the cliff guided by the siren song of the OVERVALUED YUAN as something to be worshiped at all costs.  

At this point, the West does not need to do anything but watch China self-destruct.

And it is doing so at a rapid pace.

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Post time 2015-7-22 16:23:23 |Display all floors
futsanglung Post time: 2015-5-19 16:41
So maybe the solution is to let currency float freely and then the market can set the price

That's the last thing they want no control

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