Cross-posted from Investing in Chinese Stocks.
Chinese are very nervous about the IMF vote. There were many reports that the IMF postponed its November 4 meeting, but the IMF had previously stated the meeting would be in November, with no specific date. Where Chinese media got the November 4 data is a mystery to me. One such article is at iFeng: IMF“爽约”人民币决议 个中有何玄机, it theorizes what this “delay” means, but quotes economists who say the yuan is likely to be added to the SDR basket.
Another article asks, what will happen if the yuan enters the SDR? It speculates the yuan will be 14% to 16% of the basket based on trade and reserves:
According to IMF the relevant provisions of the currency itself is a combination of the weight of the exporting country where the issuer and other currencies as the foreign exchange reserves held by the amount derived, are expressed in units of SDRs. According to the latest data, the relative share of exports and reserves were 60% and 40%.
Based on these two indicators, China’s exports (including exports of goods and services) in 2014 was $ 2.341 trillion, compared with Japan ($ 736 billion) and the UK ($ 835 billion) more than twice, only slightly lower than the United States level ($ 2.352 trillion) (uncertain whether the eurozone export data should not be included within the euro zone exports). Instead, the foreign exchange reserves denominated exposure data in 2014 was only $ 76 billion, far less than $ ($ 3.839 trillion), euro ($ 1.347 trillion), pounds ($ 231 billion) and Japanese yen (237 billion US dollars ).
If the yuan included in the new SDR currency basket, its weight will be much higher than the right of the pound and the yen’s weight, but still far below the US dollar and the euro. IMF August report recommends yuan in new SDR currency basket weights will be 14% -16%. Our results calculated basically the same.
RMB included in the SDR SDR interest rate will also affect the SDR interest rate is based on interest rates in March SDR currency bonds is adjusted weekly. Since October 2014, the SDR interest rate to 0.05 percent the lowest. Dollar, euro, pound, yen last three months Treasury bill rate of 0.04% – 0.36%, 0.48% and 0.00%, the lowest interest rates and therefore constitutes a practical lower limit binding. 3-month Treasury bill rate was 2.286% renminbi, if included, would make the SDR interest rate increases by about 22 basis points.
iFeng: 人民币若加入SDR会发生什么
Also getting a lot of headlines is a phone interview with UBS chief China economist Wang Tao, who had the following to say about the yuan:
The exchange rate is concerned, since the exchange rate reform this year, began to have some of the devaluation, there are some important sense the appreciation of RMB exchange rate reform is mainly to increase his flexibility, the degree of two-way floating, gradually decoupling with the dollar, I think this is very necessary, we can also see that the US economic recovery is now relatively stable, the Fed will start raising interest rates, the dollar has seen a sharp appreciation against all major currencies and emerging market currencies. With the US dollar means that the yuan relatively basket of currencies there is a clear appreciation that this trend will continue, the renminbi is now overvalued now, the domestic economy is also facing downward pressure. Our interest rate policy would also go down, and this time really should be decoupled with dollars.
The interview touches on the new 5-year plan, GDP growth, and debt among other topics. iFeng: 瑞银汪涛：人民币纳入SDR后应与美元脱钩
Another take, but same conclusion, Bloomberg: Burbank’s Passport Says No Place Safe in China-Led Decline:
“The big risk for global markets over the next several months is a worsening in China’s economy — characterized by nonperforming loan issues — which could lead China to de-peg from the U.S. dollar, lower rates and, in the process, force the liquidation of risk assets around the world,” Burbank wrote. The world may be heading into “a global downturn that leaves no region safe, including the United States.”
And one major driver of bad loans, property, is now seeing its rebound slowing. SCMP: China developers expected to ramp efforts to meet full year sales targets
China’s developers will increase project launches in the next two months, cutting prices if necessary, to hit full-year sales targets, industry analysts said.
With the year’s best season ending, about half of the 30 major developers on a list by consultancy E&H Corp still had to plug a 20 per cent gap in their annual sales targets.
National inventory dropped slightly, but the speed of the decline is slowing with sales: 全国主要城市楼市库存稍降 去化仍是主基调
the property market continued easing to stimulate the real estate demand accelerated release. Just last October, the nation’s major urban real estate market stocks fell slightly now, to melt cycle is decreasing. Agencies believe, but inventories remain high, how to speed up “to stock” is still a major problem in some cities real estate market to face.
Sales in Beijing fell 17% in October from September, and existing home sales growth fell for the third straight month.
Chain of home network Institute data released yesterday show that in October, Beijing saw 8290 net signed new housing units, a decline of 10.4%. 3731 units of pure commercial housing turnover, a decline of 17.2%. Decline in volume and the supply of a certain relationship, Oct. pure commercial housing supply was only 1911 units, down 67.4% from September. In addition, Tongzhou restriction policy also affects the volume.
…Second-hand housing turnover also down month-on-month. Albert I love my home market Research Institute data show that in October total net signed second-hand housing Beijing to 14,382 units, fell sharply by 16.7% mom; in October I love my family reached through second-hand housing transactions, average transaction price of 39,927 yuan / square meter , was up 0.9% mom.
Albert I love my family group vice president Hu Jinghui, analysis, in October to coincide with “holiday”, the total amount of transactions declined to be expected, but the cooling momentum Beijing second-hand housing transactions continues.
iFeng: 京楼市10月成交环比降17% 二手房连跌仨月
