Daily Management Review

China starts a new round of trade war with the United States


09/19/2017


The Chinese currency’s rally ended with a sharp weakening. Over the past eight trading sessions, the offshore exchange rate of the yuan has lost 16 figures. Why?



Jamie Davies
Jamie Davies
The movement of the Chinese currency rarely happens without intervention of the country's monetary authorities. This time is no exception. September 8, the Chinese regulator, in fact, gave speculators a green light on the game to reduce the renminbi. This happened just at the moment when the yuan was rapidly strengthening and reached a maximum in relation to the dollar in two years. Then media reported that the monetary authorities are concerned about such a rapid strengthening of their currency, as this harms exporters.

The growth rate of exports of Chinese goods to the world market has slowed dramatically: from 10% last year to 5.5% in August. Imports, on the contrary, jumped by 13.3%, squeezing the net inflow of currency from trade to $ 41.6 billion in the first eight months of this year.

The message was heard, and there was a reversal in the foreign exchange market: the offshore rate of the renminbi has been declining for eight consecutive days. In addition, the People's Bank of China decided to cancel the regulations introduced in October last year for transactions with foreign exchange contracts - banks were required to reserve 20% of the amount of transactions on currency derivatives on the account with the Central Bank. Now, these requirements are reduced to zero.

This is the strongest eight-day drop in the exchange rate of the Chinese currency since the election to the United States. Of course, the American president is now in a rage. After all, as you know, the RMB exchange rate is one of the main elements of the two countries' trade war.

During his speech at the meeting organized by the research organization of the Center for Strategic and International Studies (CSIS), the US representative in trade talks, speaking about the trade policy priorities of the Trump administration, said that China is one of the challenges for the United States and that he is " is much more complicated than all the challenges that the United States has faced before. " The official also called coordinated actions to develop China's economy "a threat to world trade, which is unprecedented."

It is also worth adding that in his speech, the American official, in fact, in fact, in an open text, equated "world trade" with "the US economic system."

source: zerohedge.com






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