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It is currently costing the Chinese central bank about $240 billion per year to hold down the value of the Chinese currency relative to other currencies. This cost is growing rapidly. The cost would decrease significantly if China allowed its currency to float and began reducing its foreign reserves, although there would likely be a [...]
Nicholas Consonery is an Asia Analyst at Eurasia Group. China’s leadership faces many difficulties these days. Exciting international investors about the Chinese currency, the renminbi, generally isn’t one of them. In fact, the explosion of the offshore renminbi market in Hong Kong since 2010 is perceived as a major success in Beijing. It will probably [...]
Over the past several years, the Chinese government has frequently argued that the renminbi is steadily moving towards an equilibrium exchange rate. China’s financial authorities made this claim in their responses to both the 2010 and 2011 IMF Article IV Reports. 2010: “They [the authorities] viewed the level of the renminbi right now as much closer [...]
In one door and out the other is a good way to describe the flow of Chinese bank profits. The state-owned commercial banks are as profitable as they’ve ever been, but their profits are being passed along to shareholders at a rate that is reducing their capital base to unsound levels. While most large state-owned enterprises [...]
Be sure to check out the Economist.com which is currently holding a moderated debate related to Arvind Subramanian’s new book Eclipse: Living in the Shadow of China’s Economic Dominance. The motion being debated is: “This house believes that the yuan will be the world’s main reserve currency within 10 years.”
There’s quite a bit of buzz surrounding the rapid increase of wealth management products (银行理财产品) in China. What role do these products play in China’s financial system and what risks do they present to financial stability? Wealth management products (WMPs) are a relatively new type of financial instrument that act as an alternative to traditional [...]
All the discussion about including the renminbi in the Special Drawings Rights (SDR) basket established by the International Monetary Fund (IMF) is a side-show or distraction with the real action being the conditional imminence of the renminbi’s rise. That is not a judgment, just a description of reality. Last week, the renminbi was in the [...]
The current round of renminbi appreciation was announced on June 21, 2010. Since then, over three hundred trading days have passed and the currency has steadily ticked upwards against the dollar. Indeed, the renminbi appears to be moving relatively quickly when compared to the previous round appreciation that began on July 21, 2005. The current round [...]
The New York Times has a column on September 8th (“China’s Rise Isn’t Our Demise”) in which Vice President Joe Biden stresses the positive-sum rather than zero-sum nature of the relationship between China and the United States. But is it entirely positive sum? Are there elements of rivalry and possibilities of conflict? And how should [...]
Housing prices in China may have stalled in the short-term, but the long-term drivers of the property bubble are still in place. Official statistics show that the tightening measures introduced by the government early last year are beginning to take the steam out of housing price increases. According to NBS data for 70 cities across China, housing [...]