People's Bank Of China
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"Being bearish on China for the last few years has reminded me of the 1987 action classic "Predator". For bears, much like the alien in Predator, the Chinese government has continually used special abilities that were previously unknown. Bearish investors in China had been picked off relentlessly and seemingly effortlessly by the government and the central bank. But then just as suddenly, the stock market started to sell off and the pressure on the currency began to build. This led to the small devaluation we saw in the Renminbi in August."
"Policymakers responded to the financial crisis with easy monetary policy and low interest rates. The critics — including us — argued against 'solving a debt crisis with more debt.' Put differently, we said that QE was necessary, but not sufficient for a recovery. We are now coming to the moment of reckoning: central bankers look naked, and markets have nothing else to believe in."
- CHINA PBOC CUTS INTEREST RATES
- CHINA PBOC CUTS REQUIRED DEPOSIT RESERVE RATIO
- CHINA PBOC CUTS 1Y DEPOSIT RATE BY 25 BPS
- CHINA PBOC CUTS 1Y LENDING RATE BY 25 BPS
- CHINA PBOC CUTS BANKS DEPOSIT RESERVE RATIO BY 50 BPS
In the aftermath of China's worst manufacturing PMI since the financial crisis, which in turn sent the Shanghai Composite crashing to the "hard floor" level of 3500, below which the PBOC and Beijing officially are seen as having lost control, virtually every China expert and strategist rushed to defend China's policymakers (and its stock market) with predictions that an RRR cut as large as 100 bps is imminent, and would take place as soon as this weekend, a much-needed move to calm nerves that China is in control. it did not.
Putting what China has just done in very simple context: China announces an increase in its gold holdings of over 58% (June and July)... and then it devalues its currency by nearly 5% in one week. Even the most brainwashed Keynesians should be able to see what is going on here by now.
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Although the headline number suggests that credit demand in China was robust in July, the "expansion" was entirely attributable to Beijing's mammoth equity plunge protection effort. As for the real economy, well, the picture isn't pretty.
There is much stunned confusion among Wall Street's "best and brightest" following China's historic Yuan devaluation overnight which was predicted by exactly zero of said best and brightest, just like nobody expected the SNB to give up its own peg to the EUR in January.
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Almost exactly seven months ago, on January 15, the Swiss National Bank shocked the world when it admitted defeat in a long-standing war to keep the Swiss Franc artificially weak, and after a desperate 3 year-long gamble, which included loading up the SNB's balance sheet with enough EUR-denominated garbage to almost equal the Swiss GDP, it finally gave up and on one cold, shocking January morning the EURCHF imploded, crushing countless carry-trade surfers. Fast forward to the morning of August 11 when in a virtually identical stunner, the PBOC itself admitted defeat in the currency battle, only unlike the SNB, the Chinese central bank had struggled to keep the Yuan propped up, at the cost of nearly $1 billion in daily foreign reserve outflows, which as this website noted first months ago, also included the dumping of a record amount of US government treasurys.
As China Admits It Lied About Its Local Debt Levels, Local Billionaires Are Quietly Liquidating Their AssetsSubmitted by Tyler Durden on 08/02/2015 13:26 -0400
Overnight something unexpected happened: Sheng Songcheng, the director of the statistics division of the People's Bank of China (PBOC), was quoted by the National Business Daily on Saturday whereby he essentially admitted China had been lying about not only its local debt exposure but the level of NPLs across the economy. The punchline: Sheng warned about the risks of local government debt, saying that 2 trillion yuan in bond swaps may not be able to fully cover maturing debt, according to the report. What he really said, as paraphrased by Bloomberg, is that "local govt's tended to not report all their debts when audited in June 2013, thus the 2 trillion yuan debt swap plan arranged this year may not cover all debts due, Sheng cited as saying."
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For those curious what it looks like when a centrally-planned market devolves into complete chaotic hell despite the relentless intervention of the local authorities and central planners, look no further than the chart below...