Acknowledging a housing bubble in China, the head of China Construction Bank (CICHF.PK), the country's largest mortgage lender, says the lack of leverage in the property sector should limit any downturn. On the yuan, he sees the currency becoming fully convertible within 5 years.
Agincourt Capital - a startup U.K. asset management company - in what would be the first yuan-denominated bond sale outside of China, is attempting to raise $1B to invest in recently booming, now rolling over Australian real estate. Sounds like a winner.
Shanghai's attempt to snap a seven-day slump fails at the last minute. While some economists aren't worried about the recent Beijing-induced drop in growth, others worry deeply entrenched inflation will force China to keep its foot on the brakes for a long time.
A classic news dump late in the afternoon before a 3 day weekend, the U.S. Treasury rules China is not manipulating its currency to gain trade advantage, even as it calls for a quicker rate of yuan appreciation. The action is not unexpected and continues longtime U.S. policy of huffing and puffing.
The dollar is down solidly across the board, particularly vs. the Swiss franc, where the greenback has fallen to a new all-time low. Chatter is on the rise that rate hikes could begin in Switzerland as soon as June. FXF +1.5%, UUP -0.8%.
The OECD calls on China to hike rates another 50 basis points, warning the country not to resort to price controls to check inflation just because the economy is slowing. "This would reverse progress in lessening state control of the economy," says the group.
The HSBC China PMI for April falls to 51.1, the slowest pace in 10 months. "There is no need to worry about a hard landing," say the bank's analysts, although admitting price stability has taken over from growth as policymakers' key focus. Chinese shares are slammed, -2.9%.
Sure to boost already surging yuan-denominated business off the mainland, Hong Kong will introduce a yuan fixing rate later this year. Working in the same fashion as the setting of the HK dollar, the rate will serve as a benchmark for derivatives based on the renminbi.
"The Chinese economy is slowing down more than people realize," says Goldman's Jim O'Neill, who believes it's no coincidence that commodity prices are turning south. The effusive BRIC bull says this is a good thing as it will allow China to stop tightening money. Did it ever start?
China's reserve requirement bump today is meaningless against the continued inflationary impact of the PBOC printing massive quantities of yuan to hold its value down, writes John Carney. The government's focus continues to be providing jobs for the masses, not inflation.
Noting China's trade surplus has fallen for 3 consecutive years, and the country had a trade deficit in Q1 2011, Chinese Commerce Sec. Chen Deming calls complaints about yuan policy "unfounded." Senator Sherrod Brown is unconvinced, calling for legislation to pressure China relax controls on its currency.
Worried the speedy rise of yuan deposits in Hong Kong will undermine confidence in the HK dollar, China seeks to curb this activity, says Nomura. Negligible just 2 years ago, yuan deposits are now equivalent to nearly 15% of HK dollar deposits.
As the U.S. and China come together for annual talks next week, currency (and manipulation?) should dominate the schedule - but lawmakers' calls for punishment may overlook some significant renminbi appreciation to date and overstate the U.S. benefits of a stronger yuan. That doesn't mean it's not still undervalued.
China signals it is willing to discuss its currency controls at talks in D.C. next week, but gives no indication about giving in to demands for faster yuan appreciation. The yuan has risen 5% since June, ahead of the 3% pace slated by China at that time.
China faces a serious credit collapse down the road if political calculus keeps it from "decisive" monetary tightening now to put the "inflation and credit genies back in the bottle," writes George Magnus. This Minsky moment would hit global markets and shock conventional wisdom betting on continued yuan appreciation.
Seeking to further diversify from the greenback, South Korea considers investing a portion of its more than $300B in foreign currency reserves (7th largest on the planet) in yuan-denominated securities. U.S. securities currently make up about 64% of SK's stash.
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