People's Bank Of China
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While the world was following the tragic events unfolding on Friday night in France where hundreds of innocent civilians were killed or injured, an important economic development took place at the IMF, whose staff and head Christine Lagarde, officially greenlighted the acceptance of China's currency - the Renminbi, or Yuan - into the IMF's foreign exchange basket, also known as the Special Drawing Rights. Here are the initial early responses by various Wall Street analysts.
China is playing the long game and they could be low balling their total gold holdings – official central bank reserves and non official, governmental holdings – in order to maintain confidence in their substantial US dollar holdings and to aid their bid to join the IMF.
"I Would Say Don't Worry" Says Chinese Central Banker As Indian Central Banker Says "World Economy Is Looking Grim"Submitted by Tyler Durden on 10/07/2015 19:17 -0500
"I would say, don't worry" said Yi Gang, deputy governor of the People's Bank of China, after the International Monetary Fund warned of risks in China's economic challenges.
"The world economy is looking grim" - said Raghuram Rajan, Indian central bank governor and former chief economist of the International Monetary Fund.
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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.