Monday, April 11, 2016

Will China Devalue Its Currency 
To Avert A Financial Crisis?
Ambrose Evans-Pritchard references discussions from the Ambrosetti Forum in Italy this past week on a top adviser to the Chinese government warning that China risks a currency blowup if China continues to defend its currency peg amid a deepening deflation crisis .. Yu Hongding, a director of the Chinese Academy of Social Sciences, says China is caught in two concurrent "deflationary spirals" that are feeding on the other - "They must stop intervening on the exchange market. China needs to devalue by 15%. They are creating conditions for speculators", he emphasizes that the government is making a serious mistake in trying to defend the yuan by burning through foreign exchange reserves, already down to $3.2 trillion from $4 trillion in mid-2014, & warns that the slowdown in capital outlows in March may prove fleeting. "Reserves will continue to fall until we devalue. Once we get towards $2 trillion the markets will start to panic. They won't believe that the government can control it any longer."
LINK HERE to the article

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