China Moves To Turn Yuan Into Fully Tradable Global Currency

Flashback:

Mike Krieger: This Is The Last Dance:

They refuse to allow the yuan to strengthen because they know that once they do that it will mark the real end of the dollar era. So instead they are spending like crazy on infrastructure ahead of them allowing the dollar to plunge.  Then the strong yuan will be employed to purchase all the commodities they need to utilize their infrastructure and the OECD gets priced out. To those that talk about yuan devaluation, you need to be specific.  Devaluation versus what?  Versus commodities generally along with other currencies?  I can buy that argument very easily.  Versus the dollar, highly doubtful.  Why? The latest data says China owns $877.5 billion in U.S. treasuries. All they have to do is start dumping and the dollar is finished as the Fed will be forced to print so many dollars it will make Mugabe blush.  People need to wake up.

(Mike Krieger, formerly a macro analyst at Bernstein, and currently running his own fund, KAM LP, summarizies the pretend reality we are all caught in now, knowing full well America is set on a crash course with reality at some point, yet sticking our collective heads in the sand, as the collapse will be some time in the “indefinite” future. In the meantime, banks will continue to boost US GDP by peddling “financial innovation” and restructuring advice to countries like Greece… and nothing else.)

Ready for the greatest financial collapse in world history?

This is the ‘Greatest Depression.


China moves on currency after growing US pressure (Telegraph, April 14, 2012):

China took a major step closer to turning its yuan into a fully tradable global currency today, by doubling the range by which it is allowed to rise or fall against the dollar.

The People’s Bank of China said that from Monday it will double the trading band, so that the yuan can fluctuate by 1pc every day from a mid-point, compared with its previous limit of 0.5pc.

The move demonstrates Beijing’s belief that the yuan is now stable enough to handle major structural reforms, despite slowing growth of the Chinese economy.

Analysts said the slowdown may have actually spurred Beijing to make the change, because the Chinese government knew it could introduce the larger band without causing a spike in the yuan’s value.

“The central bank chose a good time window to enlarge the trading band. The market’s expectation for a stronger yuan is weakening,” said Dong Xian’an, chief economist at Peking First Advisory in Beijing.

Nonetheless, The People’s Bank of China took the unusual step of issuing its announcement in English rather than Mandarin.

Sources said China wanted to deflect criticism of its currency policy ahead of the International Monetary Fund’s annual spring meeting in Washington next week.

IMF managing director Christine Lagarde supported the move today. She said:

“I would like to welcome this important step by the People’s Bank of China to increase the flexibility of their currency.

“This underlines China’s commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate.”

According to data released by the National Bureau of Statistics on Friday, China’s economy grew at its slowest rate in nearly three years in the first quarter of 2012.

The country’s annual rate of GDP growth slowed to 8.1pc from 8.9pc in the previous three months, marking the fifth consecutive quarter of slowing growth in China.

The figures chimed with investor fears that the slide in China’s growth has yet to bottom out and that interventionist measures are required to halt it.

China’s economic growth is seen as one of the engines for global recovery, so any decline or slowdown is seen as a warning flag for other financial markets.

China’s economy expanded by 9.2pc in 2011, its lowest rate for two years, and its disappointing start to 2012 has revived concerns about the strength of the US economic recovery.

“In general, I think the first-quarter export results have disappointed the consensus. We still believe there should be more policy relaxation to add to growth domestically and offset weakness in exports,” said Kevin Lai, an economist at Daiwa in Hong Kong.

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