The great Chinese macro bind of being unable to both stimulate local growth and to hold its currency peg has never been clearer than today. From Investing in Chinese Stocks:
Articles attacking depreciation expectations and capital outflows are failing at their job because they are priming Chinese minds for depreciation. Dump stocks, dump property, get your money out of the country. Also, this article below in particular highlights the impossible bind China is in. There is no painless choice. If China prints money, the currency will devalue. If China doesn’t print money (if this is even possible without doing another forced stimulus like 2008), deflation will accelerate. As I read about China using more tricks to defend the currency, which ironically make the yuan less attractive, instead of reforms such as opening the market to foreigners, cutting taxes, cutting regulations, etc. it does not inspire confidence. Eventually, they will get around to doing the one thing that will restore confidence and completely end depreciation expectations: a large one-off devaluation. Until then…
From Sohu: 当务之急是扭转人民币贬值预期, what is the solution? There is none.
