Renminbi

China's FX Reserves Fall By Third Most On Record As Outflows Persist

China burned through some $40 billion in FX reserves in November in support of the yuan while the headline drawdown came in at a whopping $87 billion inclusive of valuation effects. It was the third largest decline in history and suggests that despite a misleading $11 billion increase in October, capital flight continues unabated.

Frontrunning: December 1

  • Global Stocks Edge Higher on Expected ECB Stimulus (WSJ)
  • Moment of truth as Puerto Rico faces crucial debt payment (Reuters)
  • Obama urges Turkey to reduce tensions with Russia, stresses support (Reuters)
  • Russian Media Takes Aim at Turkey (WSJ)
  • Support Grows for U.S. Commando Raids to Fight Islamic State (BBG)
  • Yuan Drops as SDR Approval Seen Prompting PBOC to Reduce Support (BBG)

The IMF Confirms Yuan Inclusion In SDR Basket At 10.92% Weight, Above JPY And GBP

The IMF’s Executive Board decision today means that the yuan will be included in the SDR basket from Oct. 1, 2016, effectively anointing the yuan as a major reserve currency and represents recognition that the yuan’s status is rising along with China’s place in global finance. The weight in the basket will be 10.92%, larger than JPY and GBP. However, as politically-motivated as this decision may have been, now comes the hard part for China.

Open Both Eyes

If you close your left eye, the US dollar is strong. The labor market has recovered to its pre-crisis levels. The US is affluent and free. But if you close your right eye, the dollar is astonishingly overvalued based on nearly every objective metric that exists, police forces have turned into federally-funded paramilitary units, and a grand surveillance state now dominates over the citizens, and many of the basic freedoms guaranteed by the Constitution have become watered-down aphorisms rather than inalienable rights. That’s our world. It is simultaneously full of risk AND reward. The important thing is to look with BOTH eyes.

IMF Greenlights Addition Of Chinese Yuan To SDR Basket: Wall Street Responds

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.

Ban Russian Track And Field Athletes From 2016 Olympics, Commission Urges

An "independent" commission of the World Anti-Doping Agency has found that Russia engaged in state-sponsored doping and more importantly, recommended that Russia’s track and field athletes be suspended from Olympic competition in 2016.  The "Independent" commission was led by  Canadian Dick Pound. Joining him on the commission was Richard McLaren, another Canadian lawyer and a long-standing member of the Court of Arbitration for Sport, as well as Günter Younger, head of department of cybercrime with Bavarian Landeskriminalamt. So two Canadians and a German made up an "independent" commission that now wants to bar Russia from the marquee event of the upcoming olympics.

Global Trade, Demand Continues To Dry Up As China's Exports Miss For Fourth Straight Month

China's exports fell for the fourth consecutive month in October as evidence of collapsing global demand and trade continues to pile up. “A lot of Westerners think this helped us out a lot. But the 2% depreciation actually hurt us. It was in every newspaper and customers called us within hours pushing for 6% discount, so we had to give them 4%."

How China Broke The World's "Bubble Machine"

China can’t allow its industrial economy to sink without a fight. It will have to devalue the renminbi to try to get more market share for its exports. It still has 80% of its workers earning less than $10 a day. A lower renminbi will reduce real wages further and make China’s exports cheaper than ever. And then, what about the rest of the world? As the renminbi goes down, the dollar, yen, and euro will have to go up. Commodities – priced in dollars – will stay down. U.S. corporate profits will fall. The stock market “tape” will go down. Consumer prices, too, will remain low... or go negative. Deflation. Deflation. Deflation.

China's Communist Party Bans... Golf

The Chinese are known for being strategic thinkers. This goes back thousands of years to the days of Sun Tzu. Leaders don’t act haphazardly, they make long-term plans and execute in a disciplined manner. But it’s becoming pretty obvious now that the Chinese government is in reaction mode. Their system is based on a bunch of unelected policymakers sitting in a room and making decisions to control one of the largest economies in the world. But now it’s all extremely reactive. The grand plans and strategy have gone out the window, and instead they’re taking it day-by-day, making it up as they go along. To us, this is a sign of how bad things really are.

Futures Fade Overnight Ramp After BOJ Disappoints, Attention Returns To Hawkish Fed

Back in September we explained why, contrary to both conventional wisdom and the BOJ's endless protests to the contrary, neither the BOJ nor the ECB have any interest in boosting QE at this - or any other point - simply because with every incremental bond they buy, the time when the two central banks run out of monetizable debt comes closer. Since then the ECB has jawboned that it may boost QE (but it has not done so), and overnight as reported previously, the BOJ likewise did not expand QE despite many, including Goldman Sachs, expecting it would do just that.

Who's Really Isolated? Iran Set To Join BRICS Bank, Strengthen Ties With Brazil

On the heels of the nuclear deal and Tehran's ground operation in Syria, Iran is stepping up efforts to prove that contrary to Western rhetoric, it is not in fact "isolated." According to the country's economy minister, Iran is now set to join the BRICS bank and step up its cooperation with Brazil. This is symptomatic of Washington's waning ability to exert American influence on global affairs both political and economic.

Putting China's "6.9% GDP Growth" In Context

  • China export trade: -8.8% year to date
  • China import trade: -17.6% year to date
  • Industrial output crude steel: -3% year to date
  • Cement output: -3.2% year over year
  • Industrial output electricity: -3.1% year over year

and so on...