Crisis China quietly joins Asia’s currency wars to avert deflation & we all take 1 more step to complete total war!
Investmentwatchblog.com
January 1st, 2015
China quietly joins Asia’s currency wars to avert deflation
China is exposed like a sore thumb as countries devalue on all sides, from Russia, to Japan, Indonesia and Malaysia
China has for the first time warned openly about the excessive strength of the Chinese yuan, a sign that the country may be shifting its exchange rate policy as deflation takes hold and currencies slide across Asia.
Yi Gang, the deputy governor of the People’s Bank of China (PBOC), said the yuan’s rise had been “very fast” over the past year as it surges in tandem with the US dollar, making it the world’s second strongest currency.
China’s real effective exchange rate (REER) has risen for six months in a row, tightening the screws on struggling exporters with wafer-thin margins. It rose 2.3pc in trade-weighted terms in November alone as countries devalue on all sides, leaving China exposed like a sore thumb. The effect is to tighten China’s monetary conditions into the downturn.
The country has quietly joined Asia’s escalating currency wars, steering the yuan down by 2pc against the dollar since early November. This looks increasingly like a move to protect itself against Japan’s dramatic devaluation and against weakening currencies in Korea and other key Asian states.
The yuan is no longer fixed to the dollar but remains linked through a “soft peg”. It has therefore been forced sharply upwards this year even though the Chinese economy is slowing and the country is losing global competiveness.
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