by Chris Becker
Its getting confusing reading the tea leaves regarding the Chinese economy. Earlier in the week we had solid confirmation from PBOC and Finance Ministers that the old model of goosing the economy with stimulus whenever theres even a slight dip in a major economic indicator, was not to be repeated in the future.
This jawboning squared with the notion that the Chinese economy – currently addicted to unsustainable fixed asset investment and a real estate bubble that is teetering – was restructuring and maturing to a consumer based economy. Sensible, with a lot of short term pain, but ensuring prosperity over the long run.
However, in news that is sure to warm the hearts of a class of speculators (and government forecasters) who rely upon the endless stimulus for their <insert ego, career, bottom line option here>, the WSJ is reporting (possibly on rumors only) that the head of the PBOC is to be replaced:
Chinese leader Xi Jinping is considering replacing Mr. Zhou, say party officials, as part of a wider personnel reshuffle that also comes after internal battles over economic reforms.
The discussions occur as Mr. Xi, now two years in office, tries to place more allies into top positions in the government, military and Communist Party, according to the officials with knowledge of the plans. The personnel shifts are expected around a major party conclave to be held next month, the officials said, while cautioning that no final decision about Mr. Zhou has been made.
The chaps at Forexlive are right to be skeptical about this article:
… if there’s a power struggle at the central bank it makes more sense. The WSJ frames the story saying Zhou has pushed for reforms but the central government wants to ensure growth targets are met. If that’s the case (I’m not so sure) and a new regime that’s more prone to juicing growth is introduced, then it’s a huge potentially positive catalyst for commodity currencies and risk assets.
Indeed.