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China’s central bank eases fears on yuan devaluation
THE AUSTRALIAN AUGUST 14, 2015 12:00AM

David Rogers

Markets Editor
Sydney

China attempted to restore calm to global financial markets yesterday, saying its currency devaluation was “basically already completed” and it would only step in when the market is “distorted”.

The People’s Bank of China also lowered its official yuan rate a further 1.1 per cent against the US dollar — bringing its cumulative decline this week to 4.5 per cent.

An abrupt shift of foreign exchange policy towards a market-based system, combined with China’s biggest devaluation in 21 years, has triggered sharp falls in regional currencies and equities this week amid concern about a potential loss of competitiveness.

Australian financial markets reacted cautiously. The local stockmarket was unable to sustain much of a recovery after hitting a seven-month low this week after the yuan devaluation.

The Australian dollar was trading around US73.5c late yesterday after hitting a six-year low.

At a news conference in Beijing yesterday, Chinese central bank officials offered a rare public defence of their policy, saying the yuan would stabilise and eventually resume its climb.

PBOC vice-governor Yi Gang said China had the financial power to defend the currency as needed.

China’s previous policy of holding the yuan broadly stable against the US dollar contributed to a $US315 billion ($443bn) ­reduction in its foreign reserves and lower exports in the past year.

But officials also said the yuan’s underpinning remained firm and that its value should strengthen. They dismissed the idea that the move was made to help the country’s sputtering exports sector.

“In the long run, the renminbi (yuan) remains a strong currency,” said PBOC assistant governor Zhang Xiaohui.

They also said the move — made through a mechanism intended to give markets more say in how the yuan was valued — gave the central bank more room to manoeuvre at a time when the US dollar was appreciating against most other currencies.

“A fixed exchange rate looks stable, but it hides accumulated problems,” Mr Yi said. The news conference was an unusual event for an organisation that rarely puts a public face forward and typically communicates through lengthy messages on its website. Foreign reporters as well as state-controlled media were invited.

It also marked a rare public stepping out for Mr Yi, the PBOC’s No 2 official and the one responsible for day-to-day oversight of foreign exchange.

Mr Yi described as “nonsense” a report that the PBOC wanted to engineer an eventual 10 per cent depreciation of the currency in an effort to help exporters, which play a vital role in the economy but have been suffering from sluggish global demand as well as a stronger currency.

He also said China would continue its own schedule to open up the country to freer cross-border capital flows despite recent market fluctuations.

The Wall Street Journal reported on Wednesday that the PBOC intervened in the foreign-exchange market late that day to defend the currency. Asked about that move, Mr Yi said the PBOC had stopped “regularly” intervening in the market to control the yuan’s value, but the central bank had adopted a “managed floating-rate regime” and would intervene during “external shocks”.

Investors said greater market influence presaged more volatility to come.

“It’s going to be a period of volatility for the next few months before (the yuan) finds its equilibrium level,” said Alexandra Edstein, senior portfolio manager at London-based hedge fund The Cambridge Strategy.

“The trend will be depreciation.”

Nikko Securities senior fixed income portfolio manager Chia Woon Khien said the yuan’s weakness was likely to persist for a few months, at least until after the US Federal Reserve’s first interest rate hike, which most economists expect to occur at its next meeting on September 16-17.

But she didn’t expect the currency to devalue more than 10 per cent versus the US dollar.

“Thereafter, the currency will likely be on a long-term appreciation path,” she said.

The PBOC also said it had acted because the Chinese currency was rising while market forces said it should fall.

The move towards more flexibility at a time when market pressures were set to push the yuan down left Washington and other trading partners that have criticised Beijing’s currency controls off-balance. They have urged China for years to switch to a market-based system but assumed that would cause the yuan to rise and help their own exporters.

That leaves the US government in an “awkward and difficult” position, said Eswar Prasad, a professor of trade policy at Cornell University. “A falling yuan and a rising bilateral US trade deficit with China will sharpen congressional criticism of China’s currency policies,” he said.

“But the administration has no economic basis for criticising China’s move,” said Mr Prasad. “Indeed, preventing the yuan from depreciating further would run counter to US and IMF calls for a more market-determined ­exchange rate.”

additional reporting: dow jones newswires, AP
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It is a major port, and is shutdown now. What is the damages to China economy, and companies?

China investigates cause of blasts at Tianjin port, firms assess damage

TIANJIN, China - Investigators searched for clues on Friday to identify what caused two huge explosions at a warehouse used to store toxic chemicals and gas at a busy port in northeast China, as foreign and local companies assessed the damage to their operations.
...
http://www.todayonline.com/world/huge-ex...hern-china
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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(14-08-2015, 10:11 AM)CityFarmer Wrote: It is a major port, and is shutdown now. What is the damages to China economy, and companies?

China investigates cause of blasts at Tianjin port, firms assess damage

TIANJIN, China - Investigators searched for clues on Friday to identify what caused two huge explosions at a warehouse used to store toxic chemicals and gas at a busy port in northeast China, as foreign and local companies assessed the damage to their operations.
...
http://www.todayonline.com/world/huge-ex...hern-china

at first I thought it was another fireworks factory got blown up.

then i saw the second bigger explosion looks like a NAPALM bomb or something. so i thought it could be a terrorist act.

then i thought hey this is CHINA. probably someone forgot to turn off the tap at the terminal after the truck finished loading LPG then went for his cigarette break.

"我们来研究研究(烟酒烟酒)“ [let us investigate] Tongue
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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China strengthens yuan against US dollar, after surprise devaluation
AFP AUGUST 14, 2015 11:46AM

China’s central bank has raised the value of the yuan after three days of falls. Source: AFP

China’s central bank has strengthened the yuan currency against the US dollar by 0.05 per cent, ending three days of falls after a surprise devaluation.

The daily reference rate was set at 6.3975 yuan to $US1.0, up from 6.4010 the previous day, the China Foreign Exchange Trade System said.

The rate was also slightly higher than yesterday’s close of 6.3982 yuan.

The stronger fixing for the yuan came after the People’s Bank of China reassured financial markets by pledging to seek a stable currency after a shock devaluation of nearly two per cent on Tuesday.

The cut, and two subsequent reductions, sent global financial markets into a tailspin as it raised questions over the health of the world’s second-largest economy and fears of a possible currency war.

Beijing said the move was the result of switching to a more market-oriented method of calculating the daily reference rate which sets the value of the yuan, also known as the renminbi (RMB).

Start of sidebar. Skip to end of sidebar.

MOREEducation, property face yuan fallout
MOREChina eases fears on yuan devaluation
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Previously, authorities based the rate on a poll of market-makers, but will now also take into account the previous day’s close, foreign exchange supply and demand and the rates of major currencies.

The currency is still only allowed to fluctuate up or down two per cent on either side of the reference rate

The Australian dollar barely moved on the latest news, in contrast to the one US cent falls it suffered on Tuesday and Wednesday when the yuan was devalued.

Shanghai shares added 0.55 per cent in opening trade following the currency’s latest move.

The benchmark Shanghai Composite Index gained 21.85 points to 3,976.41. The Shenzhen Composite Index, which tracks stocks on China’s second exchange, added 0.77 per cent, or 17.69 points, to 2,316.48.

AFP
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Yuan’s devaluation stokes Asian currency crisis fears
THE AUSTRALIAN AUGUST 15, 2015 12:00AM

Asian countries have been caught in the downdraft of China’s devaluation of the yuan, with currencies from Malaysia to South Korea taking a hit, stoking fears that conditions are forming for a fresh Asian currency crisis.

The Australian dollar also suffered hefty falls this week, pushing six-year lows, as China allowed its currency to fall.

Investors pushed the currencies of South Korea and Malaysia down more than 2 per cent in two days, making them among the biggest losers globally since China ­devalued the yuan. Vietnam and Taiwan have engineered drops in their currencies in response.

China enacted financial “regime change” this week, precipitating a sudden drop in the value of its currency, which prompted a sell-off in equity markets and fears the world’s second-biggest economy was even sicker than thought.

The People’s Bank of China on Monday said the daily trading range for the yuan would more closely reflect market prices, leading to a 3.5 per cent decline in the value of the yuan against the US dollar over the course of the week — the biggest devaluation in more than five years.

While the PBOC said the new currency setting system (the first change since introduction of the crawling peg in 2006) was part of a broader liberalisation push, cynics said it was a competitive devaluation that risked an internecine global “currency war”.

But combined with a heavy commodity price slump in the region, investors have sold off currencies where economies are closely linked to China.

Christy Tan, National Australia Bank’s Hong Kong-based head of markets strategy, said the sell- down “looks and feels” like the beginnings of a currency crisis.

Malaysia’s ringgit is down nearly 4 per cent against the US dollar this week while Indonesia’s rupiah is off 2 per cent. India’s rupee and Singapore’s dollar are also down.

“Malaysia has its own domestic sociopolitical issues that have added to the problems for the currency. The loss of confidence there is manifesting into a sell-off throughout Malaysian financial markets,” Ms Tan said. “There are also concerns that China could ­become less competitive and may be facing a deeper slowdown in its economic growth.”

She said the economic dynamics were very different to the 1997 Asian currency crisis, and that the ability of central banks to mitigate those risks was stronger than they were at that time.

Australia’s S&P/ASX 200 index, already reeling from bank capital raising and falls in key commodity prices, fell 0.6 per cent yesterday to 5356.5 points while the dollar this week touched a new low of US72.25c before recovering later in the week to US73.7c.

Citigroup’s Australian head of global markets, Itay Tuchman, said the dollar would continue to track the yuan, which means it could fall lower. “If the yuan devaluation goes substantially further as we expect, the Aussie dollar will have to keep pace to some degree depending how it plays out for commodities,” he said.

Opinion is divided over whether China will continue to allow its currency to fall, even though the PBOC went to great lengths this week to insist the revaluation was a “one-off”. The International Monetary Fund, which has been agitating for China to continue to liberalise its financial controls, has welcomed Beijing’s decision.

“Greater exchange rate flexibility is important for China as it strives to give ­market forces a ­decisive role in the economy and is rapidly integrating into global financial markets,” the IMF said.

Economist Saul Eslake said China wanted to stop the yuan, which has been fixed against the US dollar since 2006, from being dragged up further against other Asian currencies because of the improved outlook in the US.

“The yuan had risen by 20 per cent in trade-weighted terms since the beginning of 2012, even though it has been stable against the US dollar,” Mr Eslake noted. China’s exchange rate had appreciated 14 per cent on a trade-weighted basis over the past year.

ANZ China economist Li-Gang Liu said in the short term weaker Chinese purchasing power on the global market would sap demand for Australian products. “But longer term this will make Chinese monetary policy more consistent, and bring China closer to having a floating exchange rate system,” he said.

Citigroup economists believe China grew at an annualised pace of 5 per cent in the first half of the year, considerably lower than the official target of 7 per cent — Chinese producer prices have been falling for 41 consecutive months. “We can feel this already this in the trade balance, in the volume and prices of exports and imports,” Johanna Chua, Citigroup’s head of Asian Economics in Hong Kong.

“In the end the exchange rate will be determined by fundamentals.”
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China’s economic reforms: doubts emerge
LINGLING WEI THE WALL STREET JOURNAL AUGUST 15, 2015 12:00AM

As China’s central bank fights to stick with a year-end timetable to open up the country’s markets, questions are emerging about whether the creaky financial system, and the people who run it, are up to the task.

Allowing market forces more influence over the exchange rate, a path the People’s Bank of China embarked on this week, is only one step on the road to tearing down the barriers that keep money from flowing across China’s borders. While President Xi Jinping himself has promoted the idea of market forces playing a decisive role in China’s economic priorities, the PBOC has led the push to liberalise capital markets.

But China’s stockmarket meltdown exposed holes in the country’s financial regulations that its watchdogs are now trying to plug. That leaves political leaders little capacity or appetite to oversee a system where investors worldwide have the ability to easily move money in and out of China.

Indeed, officials across the Chinese bureaucracy are raising concerns over such a move at a time of persistent economic weakness.

“The biggest issue right now is if there will be adequate financial supervision to prevent disruptive capital movements,” said an official at the Commerce Ministry.

It is a different playing field than in March, when China’s central bank governor, Zhou Xiaochuan, stunned global business leaders with a pledge to open up the financial system of the world’s No 2 economy by the end of 2015.

Still, the PBOC has shown no signs of backing down.

On Thursday, the PBOC staged a rare news conference, even taking questions on its plans for the currency and financial reforms, in a sign of Beijing’s desire to better manage expectations.

When asked whether China could still meet its year-end goal, Yi Gang, deputy governor at the PBOC, said: “I’m confident.”

Mr Yi, who is responsible for oversight of the country’s financial flows, said China would press ahead on opening markets up to foreign investors according to its timetable. That process “won’t be easily derailed by small (market) fluctuations or external events”.

Mr Yi also defended the central bank’s handling of the yuan this week. On Tuesday, the PBOC devalued the currency by 2 per cent in a move to help China’s exporters and make the exchange rate more market-driven, as Western institutions have long urged. The yuan has weakened almost 3 per cent against the US dollar since then.

The central bank has many reasons to prevent a free fall in the yuan. A tumbling currency could set off a wave of capital outflows at a time when more funds are needed to spur the economy and the PBOC is trying to rally political support for financial overhauls.

The stockmarket sell-off that began in June came after an epic rally had sparked the creation of lending tools and other financial arrangements to help investors buy shares — tools that had escaped notice from regulators until debt built up, prices fell and investors ran for the exits.

Now, officials are worried about taking on more risk, a change in attitude welcomed by some critics of the central bank’s plan to free up China’s cross-border movements. One critic, Yu Yongding, an economist at the Chinese Academy of Social Sciences and a former adviser to the PBOC, says China’s glut of savings — deposits stand at $US21 trillion, or more than 50 per cent of the economy — will pour out of the country if capital controls are loosened before the financial system is strengthened.

Liberalising movements now would result in “huge capital outflows”, Mr Yu said.

The opening of the capital account had been a vague policy objective until Mr Zhou, the PBOC’s governor, earlier this year overcame resistance from conservatives who had viewed such liberalisation as a Western concept that would only expose China to greater financial vulnerabilities.

He was able to convince the opposition by tying an escalated agenda to the goal of turning the yuan into an international currency — a priority that resonates with China’s nationalists.

But now, many of the converts within the government are having second thoughts.

The main fear is that China’s largely state-controlled financial system isn’t robust enough.

The Wall Street Journal
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New explosions and fire in Tianjin send smoke into the sky

BOOM and POP goes the weasel, again... First they made fake iphone batteries that melted now its the dodgy warehouses. Looks like warehousing in China is getting to be a dangerous business... How much will the GDP be hit by this man made disaster?
Virtual currencies are worth virtually nothing.
http://thebluefund.blogspot.com
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If there is no destruction how can there be rebuilding and further GDP creation Big Grin

(15-08-2015, 04:37 PM)BlueKelah Wrote: New explosions and fire in Tianjin send smoke into the sky

BOOM and POP goes the weasel, again... First they made fake iphone batteries that melted now its the dodgy warehouses. Looks like warehousing in China is getting to be a dangerous business... How much will the GDP be hit by this man made disaster?
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(15-08-2015, 05:59 PM)greengiraffe Wrote: If there is no destruction how can there be rebuilding and further GDP creation Big Grin

(15-08-2015, 04:37 PM)BlueKelah Wrote: New explosions and fire in Tianjin send smoke into the sky

BOOM and POP goes the weasel, again... First they made fake iphone batteries that melted now its the dodgy warehouses. Looks like warehousing in China is getting to be a dangerous business... How much will the GDP be hit by this man made disaster?
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It is a disastrous with many casualties. Let's be sensitive on your posting.

Just a gentle reminder.

Regards
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“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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