7 ms·

Yuan falls to 11-year low

118 points by ccarpenterg 7y ago

hourislate 7y ago
The Chinese are doing everything they can to make sure US tariffs don't affect US consumers. And discourage factory work to leave for other countries (Vietnam, Mexico, Taiwan, Thailand, etc).
- b_tterc_p 7y ago
  Is it easy for blue collar Chinese to leave and work in other countries?
  - freehunter 7y ago
    I didn't read their comment as "preventing Chinese citizens from leaving to work in other countries" but rather "preventing factories in China from closing and moving to other countries". The workers wouldn't be going with the factories, the workers would just be unemployed.
  - codehalo 7y ago
    I think the person meant the work, not the workers.
- chrisjc 7y ago
  Doesn't the increase in cost of supplying the money that Americans need to buy Chinese goods (buying TBonds) just offsetting making goods cheaper?
  - jussij 7y ago
    For many years the value of the Chinese exports to the USA have been much greater than it's USA imports. This large trade surplus basically means China earns a lot of USD and it uses those US dollars to buy US T-Bonds. So for T-Bonds the USD/Yaun exchange rate does not come into the picture. But that low USD/Yaun exchange rate does help to keep Chinese exports cheap and that then helps to protect their trade surplus.
    - Fjolsvith 7y ago
      Its win/win for the USA. Trump gets to push the Chinese around and American consumers get to keep buying cheap Chinese goods.
samfisher83 7y ago
The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.
- vkou 7y ago
  The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
  - whatshisface 7y ago
    That's interesting, where can I see a chart of that?
    - deleted 7y ago
      [deleted]
  - xeromal 7y ago
    Seconded
  - threeseed 7y ago
    When people refer to US government they mean Federal. And the concern is that the Federal government has structurally degraded its budget such that it is running larger and larger deficits. And unfortunately when you give away money as tax cuts it's often politically impossible to reverse it.
    - pessimizer 7y ago
      It's the balance of payments that's the problem, not government deficits. All lowering the deficit does when there's a negative balance of payments is increase private debt. And if there are recession fears, the last thing you want to do is raise taxes. The problem is where the tax cuts are, not that they are tax cuts; you want to cut taxes on people who spend a high proportion of their income on consumption, not wealthy people who will sit on it. As for the political impossibility of reversing tax cuts, in the case of cuts for the rich, this is not at all due to public pressure, but private pressure, and in that the impossibility of reversing tax cuts is no different from the impossibility of not enacting them. When politicians are more obligated to voters than donors, taxes on wealthy people will rise. There is zero pressure from voters to maintain tax cuts on wealthy people, other than general support for an entire package of tax cuts if very visible middle class subsidy is mixed in with them.
joeyrideout 7y ago
Real Vision has some great commentary on the Yuan and its implications. Most recently: https://www.youtube.com/watch?v=1ssFICVFH40 https://www.youtube.com/watch?v=1ssFICVFH40 The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.
- mlyle 7y ago
  It's worth noting that China's capital controls provide some insulation against this problem-- though they obviously cannot work to compel ongoing outside investment.
  - calimac 7y ago
    Their access to the IMF was huge and they have favorable nation status for finance to support access to capital
  - rory096 7y ago
    c.f.: the Impossible Trinity https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Impossible_trinity
  - gamblor956 7y ago
    China's currency controls actually made the problem worse--a lot of non-Chinese companies immediately backed off on Chinese investments (i.e., factories, etc.) as soon as the controls were introduced.
    - seanmcdirmid 7y ago
      What do you mean? China has had currency controls for a very very long time. It doesn’t affect foreigners or foreign companies so much, they give us an easy out (we can exchange whatever we earn automatically).
      - 7y ago
pbalau 7y ago
GBP: "hold my pint"
throwawaymoney 7y ago
Off topic but relevent do people know what money really is?? https://www.youandyourcash.com/ https://www.youandyourcash.com/ https://yayc.mykajabi.com/blog/the-finance-curse-professor-confirms-the-promissory-note-in-loans https://yayc.mykajabi.com/blog/the-finance-curse-professor-c...
jonathankoren 7y ago
I don't understand this link. It's a trading quote, with no text and an irrelevant embedded video. A much better link would be something that talks about this close. For instance https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-year-low-amid-trade-tensions-1.5236518 https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-ye... I'm still confused by the coverage, since it's trading at 7 CNY to 1 USD. That's still higher than the 52 week low. Also it's higher on the chart on the right which shows the 5 year closes. I'm very confused, since coverage doesn't jive with either chart.
- ccarpenterg 7y ago
  It's low in terms of the Yuan's purchase power vis a vis the US dollar. So the Chinese need more Yuan to buy the same products/services from the US. And in contrast, Americans need less US dollars to buy the same products/services from China.
  - jonathankoren 7y ago
    I understand how exchange rates work. What I’m confused about is claim that this is an eleven year low. The article claims an exchange rate of 7.0391 CNY to 1 USD is an eleven year low, yet the 52 week range is 6.6704, and the five year low is below 6.2976. Typically, these charts show closes rather than intraday ranges, which further ads confusion about the claim.
    - locust101 7y ago
      Calling it lowest ever means that you can get more yuans than ever in 11 years for 1 dollar. If you look at the chart, it clearly shows that this is the maximum yuan amount you can get for 1 USD in at least 5 years.
      - sokoloff 7y ago
        Right. In other words, "the value of 1 yuan is the lowest in 11 years in terms of how many dollars it can buy..."
tuxpenguine 7y ago
My uneducated guess is that Yuan is still over valued. Based on the personal anecdotes around me, I can see that the government is trying everything to tighten the capital outflow. That's not the case for the reverse direction though. Everyone in Beijing or Shanghai owning a small condo with 70 lease is literally sitting on a property of nominal value of millions of US dollars. How can that value be justified? People are willing to take even 15% discount to get that assets out of the country.
- sremani 7y ago
  The magic of Chinese two step. There is a glut of Yuan in China while there is a scarcity outside. All you have to do is take a look at their M3. PBOC is printing like no tomorrow, but cleverly puts a wall with they CNY-CNH shit. Deep Throat says it should be 20 to 1 not 7 to 1.
  - vkou 7y ago
    The purpose of this isn't to fuck with foreign economies, or to kill jobs in America, or any of that other nonesense. The purpose of this is to serve as a tax on Chinese exporting companies. They get paid in USD, but they have to pay their suppliers and workers in Yuan. They are being robbed by their own government, because they are exchanging USD for Yuan at a disadvantageous rate. I don't understand why people who don't live in China give two cares about their currency manipulation.
    - sremani 7y ago
      You are seeing the effects of this "manipulated" exchange rate in American real-estate in every metro-area. One thing you have to understand is, the exchange controls are for plebs, but the connected including the members of Politburo and State Owned firms (directly or indirectly), can happily get dollar in exchange of the funny money and buy REAL assets across the world. It can viewed benignly or nefariously based on what you think their end game. But its effecting every one especially if you are in real-estate but also other things.

118 points by ccarpenterg 7y ago

The Chinese are doing everything they can to make sure US tariffs don't affect US consumers. And discourage factory work to leave for other countries (Vietnam, Mexico, Taiwan, Thailand, etc).

b_tterc_p 7y ago
Is it easy for blue collar Chinese to leave and work in other countries?
- freehunter 7y ago
  I didn't read their comment as "preventing Chinese citizens from leaving to work in other countries" but rather "preventing factories in China from closing and moving to other countries". The workers wouldn't be going with the factories, the workers would just be unemployed.
- codehalo 7y ago
  I think the person meant the work, not the workers.
chrisjc 7y ago
Doesn't the increase in cost of supplying the money that Americans need to buy Chinese goods (buying TBonds) just offsetting making goods cheaper?
- jussij 7y ago
  For many years the value of the Chinese exports to the USA have been much greater than it's USA imports. This large trade surplus basically means China earns a lot of USD and it uses those US dollars to buy US T-Bonds. So for T-Bonds the USD/Yaun exchange rate does not come into the picture. But that low USD/Yaun exchange rate does help to keep Chinese exports cheap and that then helps to protect their trade surplus.
  - Fjolsvith 7y ago
    Its win/win for the USA. Trump gets to push the Chinese around and American consumers get to keep buying cheap Chinese goods.

samfisher83 7y ago

The US is running up a huge deficit and lowering rates yet the dollar is getting stronger. It is kind of strange.

vkou 7y ago
The US government as a whole, if you combine Local, State, and Federal spending, is not running a huge deficit. It is, in fact, paying its debts down. You can quip about how sustainable this state of affairs is, but of the three, only federal debt is growing... And, if you look at inflation-adjusted metrics, that growth is very minor.
- whatshisface 7y ago
  That's interesting, where can I see a chart of that?
  - deleted 7y ago
    [deleted]
- xeromal 7y ago
  Seconded
- threeseed 7y ago
  When people refer to US government they mean Federal. And the concern is that the Federal government has structurally degraded its budget such that it is running larger and larger deficits. And unfortunately when you give away money as tax cuts it's often politically impossible to reverse it.
  - pessimizer 7y ago
    It's the balance of payments that's the problem, not government deficits. All lowering the deficit does when there's a negative balance of payments is increase private debt. And if there are recession fears, the last thing you want to do is raise taxes. The problem is where the tax cuts are, not that they are tax cuts; you want to cut taxes on people who spend a high proportion of their income on consumption, not wealthy people who will sit on it. As for the political impossibility of reversing tax cuts, in the case of cuts for the rich, this is not at all due to public pressure, but private pressure, and in that the impossibility of reversing tax cuts is no different from the impossibility of not enacting them. When politicians are more obligated to voters than donors, taxes on wealthy people will rise. There is zero pressure from voters to maintain tax cuts on wealthy people, other than general support for an entire package of tax cuts if very visible middle class subsidy is mixed in with them.

joeyrideout 7y ago

Real Vision has some great commentary on the Yuan and its implications. Most recently: https://www.youtube.com/watch?v=1ssFICVFH40 https://www.youtube.com/watch?v=1ssFICVFH40 The big risk from my point of view is that currency weakness tends to spook international investment capital who is exposed to the local currency, triggering selloffs as capital flees, exacerbating the problem.

mlyle 7y ago
It's worth noting that China's capital controls provide some insulation against this problem-- though they obviously cannot work to compel ongoing outside investment.
- calimac 7y ago
  Their access to the IMF was huge and they have favorable nation status for finance to support access to capital
- rory096 7y ago
  c.f.: the Impossible Trinity https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Impossible_trinity
- gamblor956 7y ago
  China's currency controls actually made the problem worse--a lot of non-Chinese companies immediately backed off on Chinese investments (i.e., factories, etc.) as soon as the controls were introduced.
  - seanmcdirmid 7y ago
    What do you mean? China has had currency controls for a very very long time. It doesn’t affect foreigners or foreign companies so much, they give us an easy out (we can exchange whatever we earn automatically).
    - 7y ago

pbalau 7y ago

GBP: "hold my pint"

throwawaymoney 7y ago

Off topic but relevent do people know what money really is?? https://www.youandyourcash.com/ https://www.youandyourcash.com/ https://yayc.mykajabi.com/blog/the-finance-curse-professor-confirms-the-promissory-note-in-loans https://yayc.mykajabi.com/blog/the-finance-curse-professor-c...

jonathankoren 7y ago

I don't understand this link. It's a trading quote, with no text and an irrelevant embedded video. A much better link would be something that talks about this close. For instance https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-year-low-amid-trade-tensions-1.5236518 https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-ye... I'm still confused by the coverage, since it's trading at 7 CNY to 1 USD. That's still higher than the 52 week low. Also it's higher on the chart on the right which shows the 5 year closes. I'm very confused, since coverage doesn't jive with either chart.

ccarpenterg 7y ago
It's low in terms of the Yuan's purchase power vis a vis the US dollar. So the Chinese need more Yuan to buy the same products/services from the US. And in contrast, Americans need less US dollars to buy the same products/services from China.
- jonathankoren 7y ago
  I understand how exchange rates work. What I’m confused about is claim that this is an eleven year low. The article claims an exchange rate of 7.0391 CNY to 1 USD is an eleven year low, yet the 52 week range is 6.6704, and the five year low is below 6.2976. Typically, these charts show closes rather than intraday ranges, which further ads confusion about the claim.
  - locust101 7y ago
    Calling it lowest ever means that you can get more yuans than ever in 11 years for 1 dollar. If you look at the chart, it clearly shows that this is the maximum yuan amount you can get for 1 USD in at least 5 years.
    - sokoloff 7y ago
      Right. In other words, "the value of 1 yuan is the lowest in 11 years in terms of how many dollars it can buy..."

tuxpenguine 7y ago

My uneducated guess is that Yuan is still over valued. Based on the personal anecdotes around me, I can see that the government is trying everything to tighten the capital outflow. That's not the case for the reverse direction though. Everyone in Beijing or Shanghai owning a small condo with 70 lease is literally sitting on a property of nominal value of millions of US dollars. How can that value be justified? People are willing to take even 15% discount to get that assets out of the country.

sremani 7y ago
The magic of Chinese two step. There is a glut of Yuan in China while there is a scarcity outside. All you have to do is take a look at their M3. PBOC is printing like no tomorrow, but cleverly puts a wall with they CNY-CNH shit. Deep Throat says it should be 20 to 1 not 7 to 1.
- vkou 7y ago
  The purpose of this isn't to fuck with foreign economies, or to kill jobs in America, or any of that other nonesense. The purpose of this is to serve as a tax on Chinese exporting companies. They get paid in USD, but they have to pay their suppliers and workers in Yuan. They are being robbed by their own government, because they are exchanging USD for Yuan at a disadvantageous rate. I don't understand why people who don't live in China give two cares about their currency manipulation.
  - sremani 7y ago
    You are seeing the effects of this "manipulated" exchange rate in American real-estate in every metro-area. One thing you have to understand is, the exchange controls are for plebs, but the connected including the members of Politburo and State Owned firms (directly or indirectly), can happily get dollar in exchange of the funny money and buy REAL assets across the world. It can viewed benignly or nefariously based on what you think their end game. But its effecting every one especially if you are in real-estate but also other things.