Since a lot of you are smarter than me, explain to me the outcome of this? (Looking at you GreenPlease)
I understand the Yuan is pegged below the US dollar to increase foreign investment into the country. Devaluing the currency even more pretty much increases the investment. Is their goal to offset the tariffs that are being imposed? Isn’t that self inflicted wound though as it decreases the buying power of the Chinese consumer?
Finally, is this just opening a new front in the trade war or is this a last resort tactic for China? I assume the market, being fairly efficient, expected this but just didn’t know how much they would devalue it by.
Its been years since my last economics class in college.
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
they must be thinking of us US consumers. Keeping the costs of the things we’re importing from going up despite the best efforts of our own government.
China operates a managed float, so its currency is not pegged to the dollar. The PBOC (China’s central bank) sets a “fixing rate” each day but the currency is not obliged to trade at that rate. The fix today was around 6.92 to the dollar, and then subsequently the rate traded through the psychological 7.00 level up to around 7.10. The reason this is notable is that the PBOC was considered to be holding the currency stronger than 7.00 for fear of domestic investors’ outflows if the currency was expected to weaken too much (as happened in 2016). So the yuan weakened today, and headlines are saying “China devalued its currency” but that is not really true. Yes, the PBOC moved the fix up, but the market led the currency weaker and PBOC didn’t stop it from breaching 7.00. China has been holding its currency steady and if it stepped away the yuan would likely depreciate substantially.
All that said, a weaker currency helps China offset the effects of the tariffs. But as mentioned, they can’t just let it depreciate unchecked, or they could trigger an exodus of domestic capital. But allowing it to breach 7.00 is sending a message to Washington. It has also spooked investors who fear this is a sign that trade talks are moving in the wrong direction.
Trump has threatened a further 10% tariffs on another $300bn worth of Chinese goods next month. This will include many more consumer goods than the prior rounds of tariffs. We’ll see what effect these could have on US consumer confidence. The Chinese can play the long game, and know Trump could be out of office in 17 months. They will aim to keep their economy going well enough, but are not going to roll over. Trump likely has more to lose from a continued trade war. China is also switching a lot of its purchases away from the US to other parts of the world, adding pressure on US exporters, particularly farmers.
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
When it comes to their economy, China is not aiming to hurt its citizens to make a point. The greatest threat to China’s leaders is its own economy.
I thought about that, Trump can be out of office in 17 months, we have elections which can very well play a big factor into losing the trade war. I’m not sure where the Democrats stand on tariffs, but I think they are against them.
I thought about that, Trump can be out of office in 17 months, we have elections which can very well play a big factor into losing the trade war. I’m not sure where the Democrats stand on tariffs, but I think they are against them.
Most of the Republicans are against tariffs too, but they are too chicken to do anything about it.
I thought about that, Trump can be out of office in 17 months, we have elections which can very well play a big factor into losing the trade war. I’m not sure where the Democrats stand on tariffs, but I think they are against them.
If you really want to get into the weeds on how the CNY operates, this article below will help. Main point is that the CNY can fluctuate during the day, but the PBOC dictates a (relatively wide) daily range via the fix, and intervenes during the trading day to influence the rate. They mainly aim to keep it stable vs a basket of their main trading partners’ currencies.
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
When it comes to their economy, China is not aiming to hurt its citizens to make a point. The greatest threat to China’s leaders is its own economy.
Now, human rights… that may be a different story.
I do believe they will allow their citizens to go through pain to achieve economic points. If they will violate human rights they will will also inflict economic pain. I used to believe that over time China would truly open up but I don’t believe it anymore. We allowed them to cheat the system because we believed their markets would be open to us, but they are not.
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
Western countries typically think short term (less than 10 years). Asian countries typically think long term (50 to 100 years). So, long term, how do you think this will go dowm?
i saw the trump administration just labeled china a currency manipulator. to me, china’s devaluation was simply to offset the tariffs, to keep exports flowing. of course it’ll wreak havoc with imports, which will place pressure on trump for those who export to china (e.g., farmers).
if china devalues again, wow. strap in for the ride.
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
Western countries typically think short term (less than 10 years). Asian countries typically think long term (50 to 100 years). So, long term, how do you think this will go dowm?
I kind of disagree because the Chinese don’t really appreciate the long term potential of creativity and innovation. They will never be able to create the next Google or Apple because their society does not foster the creative geniuses that build these disruptive entities.
China doesn’t play like the free world…they don’t care and will do what they need to do to win over time. Name another major world player that would risk hurting their own citizens to make a point?
Western countries typically think short term (less than 10 years). Asian countries typically think long term (50 to 100 years). So, long term, how do you think this will go dowm?
I kind of disagree because the Chinese don’t really appreciate the long term potential of creativity and innovation. They will never be able to create the next Google or Apple because their society does not foster the creative geniuses that build these disruptive entities.
you don’t think china’s thinking long term with the bets placed on electric vehicles, autonomous vehicles, and solar?