Author: abramicus

CHINA'S GROWTH IS COMING TO A HALT - WHEN WILL ITS CENTRAL BANK ACT? [Copy link] 中文

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Post time 2013-7-26 13:07:59 |Display all floors
DeDeMouse Post time: 2013-7-26 11:06
I'm amaze by the misunderstanding reactions in this thread. China is nowhere under the control of th ...

A strong currency due to international demand is one thing.  A strong currency due to China's central bank exchanging more dollars for yuans is an entirely different thing.  You need to know the difference, or you will remain amazed forever, until China's economy completely collapses under its self-paid "strong currency".

A strong currency because foreigners are willing to pay more dollars to buy Chinese Yuans increases China's foreign reserves, because all China has to do to "earn" those dollars is to print more yuans.

A strong currency because China's central bank is willing to pay more dollars in exchange for Chinese yuans reduces China's foreign reserves (which is another form of savings of the Chnese people), and comes at the expense of the Chinese people's savings.

What China's Central Bank is doing is the latter.

It is impoverishing China in the name of making Chinese exports more expensive, and does double harm to the Chinese people.  It depletes the savings of the Chinese people denomnated in dollars.  And, it makes Chinese products harder to sell abroad (because they cost more in dollars and yens) and also harder to sell inside China's domestic market (because Japanese products cost less in Yuans than Chinaese products).

Now tell me, how that makes China richer, stronger, or its economy more stable, let alone its GDP grow faster at all???

This is TREASON.

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Post time 2013-7-26 23:44:29 |Display all floors
This post was edited by DeDeMouse at 2013-7-27 00:22

Because that's the point. Inflation could causing a vastly overinflated prices. That thing created by debt. The prices will not sustainable and the bubble is usually followed by a crash in prices in the affected sector. And eventually a hyperinflation. The currency become worthless as a medium of exchange. Li want to improve balance of payments position, and/or to prevent overheating of the economy by an accelerating rate of inflation. So, stop focusing GDP. GDP is only a number. That thing can't fully determine your economy improvement. You can't keep create money out of nothing.

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Post time 2013-7-27 12:51:19 |Display all floors
DeDeMouse Post time: 2013-7-26 23:44
Because that's the point. Inflation could causing a vastly overinflated prices. That thing created b ...

THE CHNESE CENTRAL BANK SHOULD BE ORDERED TO IMMEDIATELY STOP THE OVERVALUATION OF THE YUAN BECAUSE IT IS LEADING CHINA INTO A MAJOR ECONOMIC DEPRESSION RAPIDLY.

You are trying to distract readers with statements about inflation, without any explanation how it will result if the overvaluation of the Yuan is corrected.  In fact, inflation will not occur at all when overvaluation is corrected.  The coming Great Depression of China will instead have been halted.

Overvaluation of the Yuan will cause China's manufacturing sector to be unable to sell its products abroad because its exports would be overpriced in US dollars and Yens, and also unable to sell its products inside China, because foreign imports, especially Japanese imports, would be underpriced in Yuans relative to Chinese domestic products.  Therefore, the current status quo of persistent overvaluation of the Yuan would lead to recession, unemployment, and businesses going bankrupt, in short, the current OVERVALUATION of the Yuan will surely lead to Chinas's economic collapse.  

Stopping overvaluation of the Yuan, stops the collapse of China.  It does not cause inflation, because a reasonable exchange rate of the Yuan, not its devaluation as you posit is the opposite of overvaluation, is a viable policy that can be implemented, monitored, and controlled, in such a manner that recession is prevented, while inflation is also avoided.  

The alternative of allowing the overvaluation of the Yuan to continue uncorrected is certain financial catastrophe for China, and the aftermath, due to massive unemployment, is social disorder, which is an even worse result than mere unemployment.  

This is why the current Chinese Central Bank policy of overvaluing the Yuan by using its foreign exchange reserves to buy Yuans from foreign and domestic sellers with more and more US dollars is HIGH TREASON.

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Post time 2013-7-27 13:12:30 |Display all floors
This post was edited by abramicus at 2013-7-27 14:24

THE CURRENT CREDIT BUBBLE IN FIXED ASSETS IS A RESULT ALSO OF SUSTAINED YUAN OVERVALUATION

The immediate effect of overvaluation of the Yuan is that products of Chinese manufacturing are overpriced domestically and abroad, as explained in the preceding posts.  This causes buyers to buy non-manufactured assets, of which real estate is the most readily purchasable asset.  These buyers are not buying in order to consume, unlike buyers of manufactured products.  These buyers are those who have surplus capital and are seeking a return greater than the interest rate on CD's.  They cannot buy stocks of companies which are no longer able to sell their products.  That would be financial suicide.  Instead, they buy something that is tangible, which affords a degree of safety that stocks and bonds do not, i.e., their value will never go down to zero.  In finance theory, buyers of fixed assets like real estate have bought not just a share of stocks in the realty they purchased, but they have also bought a put option that guarantees at least 50% of the value of their original investment.  Buyers of stocks need to pay another premium to buy a put option in their stocks with a strike price at half their original purchasing price, and that cost makes stocks less attractive than real assets.  Without investment in the private manufacturing market, manufacturing faces the threat of lack of working capital for the first time since FDI's were encouraged to come into China through Deng's opening up of China's economy.

The current policy of China's Central Bank to overvalue the Yuan is the financial equivalent of sabotaging Deng's opening up of the economy, because under the weight of overvaluation, no amount of opening up of the economy will generate more jobs or increase productivity of the country.  Instead, under the pressure of an overvalued Yuan, more opening up only means China will stop producing even faster, as foreign goods will more easily flood China's market, while Chinese exports remain overpriced and unsellable abroad, aside from being held back by the usual regulator barriers imposed on Chinese products in the name of product safety, and therefore, Chinese workers will lose more jobs in a much shorter time.

Overvaluation leads to inflation of fixed assets, which is what is happening right now in China.  If China's leaders sincerely want to combat inflation, they should correct the mistake at the source - force the Chinese Central Bank to devalue the Yuan to a lower exchange rate that is sustainable such as at 1 USD: 7.5 CNY.

Now, or it will be too late once the GDP growth rate drops to 5%, because the momentum of the collapse will surely break the GDP growth rate thereafter to below 3%, when massive unemployment will become inevitable, as production would no longer be commensurate with population growth.

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Post time 2013-7-28 00:05:28 |Display all floors
Yuan will not overvalue. That is absurd statement. If productivity is increasing, prices should deflate and consumer purchasing power should increase.

Yes, deflation is not very good for profligate governments and financial speculators but on the other hand the prudent saver benefit as their purchasing power increase with deflation.

I don't buy that fear of economic collapse. But what we should fear is the monopoly profits and crony capitalism benefits that keep them fat through the use of state power to insure a non-competitive market and to increase their parasitic gains to the detriment of the middle and working classes.

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Post time 2013-7-28 01:23:25 |Display all floors
This post was edited by abramicus at 2013-7-28 02:25
DeDeMouse Post time: 2013-7-28 00:05
Yuan will not overvalue. That is absurd statement. If productivity is increasing, prices should defl ...

Again, your post attempts to distract readers by attacking deflation, while just a while ago, you were attacking inflation.  Neither deflation nor inflation are the causes of the problem of China's GDP growth rate collapsing at an alarming rate.  Rather deflation of manufucturing and inflation of fixed assets will result from further deceleration of China's GDP if the OVERVALUATION OF THE YUAN AS IT IS AND HAS BEEN FOR MORE THAN TWO YEARS NOW is not quickly corrected.  

You are stalling for time, because you know if Chinese leaders vacillate listening to their economists and central bankers explaining away the GDP deceleration using other reasons, then China will not avoid a HARD LANDING, indeed, a CRASH OF ITS ECONOMY will no longer be avoidable, MEASURED NOT JUST IN FALLING STOCK PRICES but in widespread and prolonged unemployment, because once a factory closes, it will take at least another 5 years to build one again.

China's productivity, as measured by its GDP, is decelerating at a rapid rate.  Eventually, the GDP growth rate will drop to zero, if the overvaluation of the Yuan is not stopped, but before GDP growth rate drops to zero, when it reaches 3% annual growth rate, massive unemployment will begin to take place as businesses cancel plans for production in order not to be burdened with unsellable inventory.

Yuan is overvalued, this is not an absurd statement.  This is the truth which accompanies the fact that China's GDP growth rate is the worst it has been since Deng began economic reforms.  Parroting Deng's call to open up the economy while making all Chinese products harder to sell abroad (because their prices in dollars would be higher than before) or inside China's domestic market (because their prices in Yuans would be highter than foreign, especially Japanese, imports) is a betrayal of the Chinese people.

Your post shows that China's enemies are quite worried that the truth about China's Central Bank's pernicious policy of  overvaluing the Yuan will be known, and corrected in time.  The Chinese central bank is not just planning to overvalue the Yuan, but already has overvalued the Yuan by 34% from its original exchange rate.  The absurd exchange rate, where the demand for the Yuan causing it to rise is NOT coming from their natural buyers, foreigners, but from its own creator, the Chinese Central Bank, buying Yuans from foreigners and SOES/bigwigs planning to invest abroad, using the national savings stored in its foreign currency reserve - when it has NO REASON TO SPEND A SINGLE DOLLAR TO BUY ANY YUAN BECAUSE IT CAN JUST PRINT IT.  If China wants more Yuans, it does not need to buy the very currency, it can just create it by a few keystrokes from its central bank transmitted to a commercial bank, or just print it for the price of paper.  When foreigners demand dollars for repatriation, or when Chinese SOES/bigwigs demand dollars for their foreign investments, they can and should bid for it with Yuans, and this natural demand will naturally lead to them paying more Yuans for the dollars they demand than what the Chinese Central Bank is asking from them.  This leads to the natural clearing price for the Yuan, or, its true market rate, which is going to be lower than the current exchange rate.  All China has to do to find out if this is true is to tell the Chinese Central Bank to award dollars to foreigners and SOES/bigwigs based on their highest bid in Yuans, and the truth will be known in an instant.  

This prolonged and massive misuse of China's foreign exchange reserve has caused China to lose hundreds of billions of dollars that are taken from its foreign exchange reserve by the Chinese central bank and given to Japanese and other foreign investors in China to repatriate MORE DOLLARS THAN EVER BEFORE to their home countries - every dollar and penny of which is TAKEN FROM CHINA'S OWN FOREIGN CURRENCY RESERVE!  

Even more worrisome for the future, this erroneous Chinese Central Bank policy of persistently overvaluing the Yuan has caused Chinese export AND domestic markets to be closing up to Chinese producers, who find their products overpriced abroad AND inside China.  The overvaluation of the Yuan will NOT stimulate domestic production and will NOT increase national wealth, but will reduce both to zero if uncorrected.

This could lead to massive unemployment, within a year, at the rate China's GDP is decelerating.  Palliative temporary easing of credit and bank reserve requirements may temporarily slow down the slide of the Chinese growth rate, but as long as the Yuan remains overvalued, as it IS, all these liquidity easing measures only create a credit bubble that will cost China even more to overcome later on.  They are compounding the problem by easing credit when the real cause of the GDP deceleration is the overvaluation of the Yuan.  The inflation of fixed assets in China right now, is one of the bubbles created by the public trying to survive the onslaught on their savings led by their own Chinese central bank.

All the corruption combined of the worst officials cannot equal the wealth being stolen from the Chinese foreign currency reserve every day, every week, every month, year after year.


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Post time 2013-7-30 13:59:25 |Display all floors
THE CHINESE YUAN IS OVERVALUED, AND THIS IS CAUSING THE CHINESE GDP GROWTH TO DECELERATE, NOW REACHING A CRITICAL POINT WHERE THE REST OF THE ECONOMY IS ABOUT TO TEAR APART IN SEEMINGLY OPPOSITE DIRECTIONS.

WHEN WILL THE PEOPLE'S BANK OF CHINA RECOGNIZE ITS MISTAKE AND CORRECT IT BEFORE IT LEADS CHINA INTO A DEPRESSION?

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