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Please Don’t Manipulate the Renminbi

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Begging, borrowing or other means. Whatever it takes the US is prepared to get what it wants. Unable to get it any other way because of real clout, the US has resorted to begging these days. The US has asked the Chinese not to go back to manipulating their currency. The Renminbi has been depreciating since the start of the year and the US fears that they might return to old habits. Certainly old habits die hard, don’t they?

A senior Treasury official stated “If the recent currency weakness signals a change in China's policy away from allowing adjustment and moving toward a market-determined exchange rate, that would raise serious concerns.”

In just the space of a few weeks the Renminbi has fallen by 2.5% (since the second half of February 2014) against the Dollar. That’s surprising in itself since the Chinese currency has done very little except steadily grow over the past few years against the Dollar.

Emerging economies might have seen their currencies depreciate against the Dollar in past months due to tapering and the withdrawal of investment in their economies, but for China it’s out of character that there should be such a drop. The Renminbi currently stands today at 6.196859 against the Dollar. We are seeing the appreciation of the past year being wiped of the value of the Renminbi today.

We know that the Chinese economy is slowing down and seeing greater difficulty for the new administration to meet the target of 7.5% GDP for this coming year. The World Bank has already cut the economic outlook for the country and some are saying that China will do no more than 7.3% in GDP this year. What is irking Washington is that the Chinese might just choose to hold down the currency so that exports are boosted. It would have little choice but to engineer a low Renminbi, given the sorry state of affairs in the EU and the emerging markets suffering from tapering. The People’s Bank of China has the ability to move the currency through a fixing rate every day, directly intervening on it. Thus, with the widening of the official trading band it can trade 2% higher or lower at will.

The US administration would clearly like to see the Chinese moving away from reliance on investment and exports and thus secure long-term prospects of growth via consumption. Of course, the US administration would like to see that. It would open up the prospect of increasing exports for the US. The Chinese are hardly going to agree to that. Beg on Treasury for the Chinese not to engineer their currency. But, what has the US been doing all along with Quantitative Easing?

Washington has been asking China for years now to allow the Renminbi to trade at stronger values so that competition for exports is better. It is doubtful if firstly the US is actually in a position to warn others to play the game by the rule book and secondly whether or not the Chinese will hear the warning.

The G20 meetings taking place on April 10th 2014 will have little room for discussion about the Renminbi or engineering low currencies; not while Ukraine is at the top of the agenda and Russia’s role in Crimea. Then, there will have to be a discussion about the state of affairs of the EurozoneGreece and the debt situation as well as unemployment…and so the list goes on. What is it they say about needing to flood the public with bad news, so they don’t see exactly what you want to hide from them?

Originally posted: Please Don’t Manipulate the Renminbi

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Fri, 04/11/2014 - 07:38 | 4646719 kurt
kurt's picture

Yuan na know what I think? It's going down I mean up.

Thu, 04/10/2014 - 16:23 | 4644742 Fishhawk
Fishhawk's picture

Another sure sign that the days of US hegemony are rapidly fading.  Soon the US and GB will be isolated in their alignment against the new Asian bloc.  Efforts to use NATO and the SWIFT system to punish Russia for behaving ethically with regards to human rights, while the neocons in control of US policy continue with their 'regime change' program for any country that does not bow to the US dollar, have been revealed to the whole world for the treachery they are, and the world is not liking what they see.  The grand finale approaches.  Meanwhile Christine is in a box; she will not be able to use the US CONgress resistance as an excuse much longer, as the G20 are fed up with this abusive status quo.  Grab your popcorn...

Fishhawk

Thu, 04/10/2014 - 20:00 | 4645651 Winston Churchill
Winston Churchill's picture

Not to worry, the BRIICS have their own plan B.

The neocons will never agree to plan A anyway, and Lagarde will get suicided if

she tries to go ahead with her own B.

Just as well she is a lizard otherwise she would be sweating by now.

Thu, 04/10/2014 - 15:21 | 4644493 mumbo_jumbo
mumbo_jumbo's picture

seems like a slow news day today.

Thu, 04/10/2014 - 14:22 | 4644217 Ifigenia
Ifigenia's picture

"The G20 meetings taking place on April 10th 2014 will have little room for discussion about the Renminbi or engineering low currencies; not while Ukraine is at the top of the agenda and Russia’s role in Crimea. Then, there will have to be a discussion about the state of affairs of the EurozoneGreece and the debt situation as well as unemployment…"

 

Wait a minute, but IMF does not need to reform? Since 2010, IMF is stuck and waiting to implement the reform agreed in Seoul. See:

"IMF eyes ‘Plan B’ for reforming itself without U.S.

he International Monetary Fund has a “Plan B” for proceeding with reforms giving greater powers to developing countries even though the U.S. Congress hasn’t approved them, but it is not ready to take that route yet, IMF Managing Director Christine Lagarde said Thursday.

Ms. Lagarde said “Plan A” is still in effect, which means she will continue waiting for the U.S. Congress to approve the reforms giving a greater share of voting power at the IMF to Russia, China and other big emerging countries, even though Republicans in Congress have repeatedly rejected them.

“I don’t think that our institution should move to Plan B until we have full certainty and massive disappointment that Plan A is definitely dead. I’m not prepared to declare that at this point. ” she said at a press briefing, noting that the Obama administration has pledged to keep trying to get the reforms through Congress.

“I very strongly hope that the resolve of the institution, the pressure brought to bear by the members of this institution on all those who have not yet ratified will deliver fruit in the not too distant future.” she said.

While Ms. Lagarde said she will continue to defer to Congress for now, her statement at the beginning of the IMF annual meeting in Washington Thursday was her first public acknowledgement that the Bretton Woods institution is considering going ahead with the reforms without the U.S. under pressure from Russia, China and other emerging countries that stand to benefit.

Ms. Lagarde did not explain what “Plan B” might involve, but IMF officials say it would be difficult and complicated for the institution to circumvent the effective veto power that the U.S. has over major IMF decisions and activities. The U.S. has the largest voting share on the IMF board, with a 17 percent weight that makes its approval indispensable most of the time.

Still, the IMF is under the gun to consider going around the U.S. as a result of a pledge secured by Russia, China and other emerging countries to do so at this week’s meetings. The pledge was secured at a meeting of the Group of 20 major economic powers in Australia earlier this year.

The emerging countries may press for faster action on the reforms than Ms. Lagarde is offering. In a sign that they already are the topic of back-room discussions, U.S. Treasury Secretary Jacob Lew is meeting behind closed doors today with his Russian counterpart, Russian Finance Minister Anton Siluanov..."
Read more: http://www.washingtontimes.com/news/2014/apr/10/imf-eyes-plan-b-reforming-itself-without-us/#ixzz2yVcIaHQF 

Thu, 04/10/2014 - 22:00 | 4645981 tip e. canoe
tip e. canoe's picture

perhaps a weekend that will go down in economic history.

buried in the hedge in a comment section of seven & change.

say it ain't so yo.

it so bro.

and so it goes...

Thu, 04/10/2014 - 13:41 | 4644052 DOGGONE
DOGGONE's picture

Just turn the light on!
http://patrick.net/forum/?p=1230886

Thu, 04/10/2014 - 13:32 | 4644017 chinaboy
chinaboy's picture

Yes! Just keep manipulating the Yen, Dollar, pounds, glod, stock, treasury ....

Do NOT follow this link or you will be banned from the site!