Another devaluation of the RMB: Causes and Consequences (Part 4)

Statement by the People's Bank of China for the new package of measures to tighten control over the work of banks in order to eliminate the shadow banking sector, in this context, is more like a diversion measure, rather than a real promise. China's shadow market poses no particular risk for micro-economic indicators of the country mainly because it is actually not internationally integrated. Cases of fraud with credit lines, decorated as an investment, are plenty in China and whatever actions the regulator takes, it's unlikely to reduce their number - too large is the population and too high is the proportion of small and medium-sized businesses in the economy. However, to direct interests of the banks in the foreign exchange market's side these measures are quite capable.
A poll conducted by Wall Street Journal among investors, has shown that the market does not believe in the cessation of the yuan decline, so invest in the currency most of the major currency players do not see the point. That's why the project to promote the yuan as the foreign currency at the present moment can be called a failure, China will have to start all over again. Most likely, at this time China will go the way of increasing - and thus large interventions in the foreign exchange market in Hong Kong can be expected in the near future.

Another devaluation of the RMB: Causes and Consequences (Part 3)

As for the strengthening of the internal market, then China will definitely have something to brag about. A recent day of sales in China, last November 11 (the so-called Single's Day, an analogue of the Western Black Friday) brought retail chains in China about 17.7 billion dollars, far exceeding the totals in the US Black Friday and Cyber ​​Monday in 2015 (when they were not reached 14 bn). Of course, much of this success belongs to China's advantage in population - 1.5 billion people probably will buy more than 300 million. However, in 2015 Single's Day brought the Chinese traders about 14.6 billion dollars - which means, that in 2016 the Chinese consumer activity increased by 1/6, while the boldest forecasts for Black Friday and Cyber ​​Monday in the US this year cannot exceed 15 billion. Of course, for the market it is a clear signal that China is a growing market for the long term, however, whether US and European investors will hear it - it is a big question. While they prefer to ignore the investment instruments, related both to the Chinese currency, and with Chinese companies (with the exception, perhaps, of bonds, although the announced issue of Eurobonds of a number of international Chinese companies do not enjoy special demand). For now the Chinese authorities manage to keep the outflow of capital from the country under control, but recent events related to the foreign exchange value of the yuan, could put the effectiveness of external investment management of China under question.

Another devaluation of the RMB: Causes and Consequences (Part 2)

On the other hand, the decline is typical for all Asian currencies. The main factors of this movement began in the first place, the mass selling of US debt, rising dollar and the weakening of the European currency. As a result, investors have shifted to work with the dollar, the market expects the Fed raising rates and the consequent further rise in the US currency, and no one looks at the Asian currencies. The volume of trading after the announcement of the devaluation of the yuan and its revaluation in fact has not changed, either in Shanghai or Hong Kong. On the Russian stock exchange these days it has been sold and bought the total amount of 10 to 19 million rubles of the Chinese currency, trading on the Hong Kong Stock Exchange demonstrates rare consistency - the yuan persistently reduced by 0.1-0.2% per day, with trading volumes in fact unchanged. It sais only that both international and Chinese investors do not believe in renminbi as a mechanism for currency speculation, so the prospects for the yuan to become the second reserve currency in two years (since the proposal from the IMF to the Chinese authorities of that possibility), haven't advanced at all.

Another devaluation of the RMB: Causes and Consequences (Part 1)

China remains faithful to the chosen course and periodically devalue the yuan. China's national currency has lost 12 consecutive sessions, and as a result, by early November the dollar was worth more than 6.9 yuan. So cheap the yuan was not worth since 2008. China's central bank stopped this trend only recently, raising the so-called reference value of the currency by 0.3%. However, that did not helped the general trend of the Chinese currency. Will it help in the future, and most importantly - is approaching or moving away the time when the Chinese currency will cease to be an exotic?
On the one hand, the behavior of the Chinese financial authorities, until recently, is quite consistent with the chosen strategy of the country to maintain the internal market and to create the most transparent environment for speculative operations with currency. Currency trading with the yuan on the mainland Exchange (Shanghai Currency Exchange) are inert - they are strictly regulated by the Central Bank. Trading on the Hong Kong Stock Exchange fully justified the possible settlement of the Chinese authorities to attract players for a fall. Even after the news about the increase in the reference value of the yuan against the dollar in Hong Kong, it continued to fall.