Jake's View | Crystal ball clearly shows further yuan weakening
The bureaucrats are worried and they don’t really know what to do
China’s central bank announced yesterday it would cut banks’ reserve requirement ratio, offering yet another sign that Beijing is committed to monetary easing to revive the economy.
SCMP, March 1
My crystal ball is clearing up. Normally it’s cloudy and I cannot see much in it but now it is plainly showing me signs that Beijing will not be able to stop further weakness in the yuan’s exchange rate.
One thing in particular makes that crystal ball turn clear on the future. It is when government officials try to hide what it shows me. The excerpt above is an example.
You get the impression from it that bureaucrats of more than normal human intellect and responsibility have determined after careful and thorough examination of the conditions that reducing statutory reserve requirements imposed on banks is the wisest course to continued prosperity.
One thing in particular makes that crystal ball turn clear on the future. It is when government officials try to hide what it shows me
What we actually have here is a purely reactive measure forced on the People’s Bank of China by its increasingly desperate attempts to keep rigging the yuan’s exchange rate while at the same time trying to control interest rates and capital flows.