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The Depreciation of the Chinese Yuan - 2014
Dawn of Asia Magazine
The Internatinalization of the Chinese Yuan (2012)
The Fallacy of the US Dollar (2011)
Faces Behind the Label (2010)
Stop The Buck - The RMB Should not Rise (2010)
The Speed Of Money (2009)
Marginalized Migrants in China (2008)
Minority Peoples Groups (2004)

 

 Global Economic Shift and the Depreciation of the Chinese Yuan

                             By Economist & Management Consultant, Chuck Chan

The US Federal Reserve reduces monetary stimulus QE easing at the beginning of this year will cause a rebound of in-flow of investment funds back to the USA.1  The slight rise of the US dollar against all major emerging markets’ currencies is a sign of rebound of US economic growth. 

The recent depreciation of the Chinese Yuan calls for ‘the end of an era’ of the appreciation trend for the years to come.2 The author predicts that the Yuan will continue to rise back to the 6.25 to 1 US$ level in 2014 to 2015.  The author also predicts the housing bubble will first burst in Hong Kong to a 20% downward level by the end of 2014 and then continue to affect Shenzhen and the rest of major urban cities of China into 2015. 

Since February 17, the Chinese yuan has lost almost 2%.  It is at 6.19 as of today (12/9/2014).  The CIMB Investment Bank at Kuala Lumpur says, “It will also mean that taking for granted a CNY appreciation…is no more.  Currencies in Asia will remain weak on this, particularly MYR, IDR, PHP, TWD.”3 (Reuters)

Everyone seems to forget about the long lost era of the Gold Standard.  We’re no longer working in an economic foundation of the Gold Standard.  We are working on a foundation of US Dollars Standard which is a fluctuation of currencies exchange rates across the globe.  Who is really the dealer and who are the players?  Gold is no longer a safe haven for all; it can be a temporarily short term safe haven but no more.  At the end of 2013, the gold price in Hong Kong has dropped sharply to 42% for the whole year.  Up to now, the international gold price has accumulated a 30% drop for the year of 2013. This is the highest drop since this century. 4

What are these trends telling you?  A rebound of the US dollars means good news for the Chinese exporters because of lower costs.  However, the outflow of capital from the emerging markets will cause the burst of the housing and stock markets.  Careful maneuver of the yuan’s depreciation is a daunting task for the Peoples Bank of China, and also for central banks of the emerging economies’ currencies. 

  

Endnotes:

1. Reuters.com 2-21-2014, “US leads pushback against emerging market at G20”

2. Reuters.com 3-5-2014, “Instant View: China aims for 7.5 percent economic growth in 2014”

3. Reuters.com 3-5-2014, “Instant View: China aims for 7.5 percent economic growth in 2014”

4. Finance.people.com.cn 12-23-2013