Made in China changing? as Yuan destabilizes further
Today the Peoples Bank of China or PBoC announced a re-weighting of their forex basket, moving the U.S. dollar down from 26.4% of the weighting to just 22.4%.
This is clever, with the strengthening dollar pressuring the Yuan everyday now, this re-weighting will give the PBoC a little more time to invent yet another mechanism — to prop up the Yuan before it breaks through 7 to 1.
That’s right, despite the political headlines about China purposely weakening their currency, at the moment, they are definitely doing the opposite. The real story in China is that the Yuan has been weakening on it’s own — despite pressure from the PBoC to create a floor with their mid-point setting process since the summer. What’s up you say, why is it naturally weakening and why isn’t the PBoC prop up working?
Chinese economists and even a lot of American economists still don’t understand the power of ftee-will and it’s economic effects.
Massive amounts of money are flowing OUT of China right now — and will continue to do so despite their manipulations — because two watershed events have happened in the last year, both working against the value of the Yuan.
The first and most critical is that Chinese investors and even the people themselves don’t trust their own government anymore (A huge purge will do that) and therefore no longer believe the CCP is the only answer to the question: “How can China be prosperous?”
And secondly, the world, China AND U.S. investors have all done a complete about-face on the macro environment now that Trump won.
These investors believe 3 profit to share price changing factors are different; the first is that U.S. corporate taxes will plummet under Trump, secondly that many profit crushing regulations will be relaxed, and finally that “Make America Great Again” is going to translate into “Make America Profitable Again,” an idea every business man and woman — even the ones in China — want a part of.