
Yuan falls to 11-year low - ccarpenterg
https://www.bloomberg.com/quote/USDCNH:CUR
======
joeyrideout
Real Vision has some great commentary on the Yuan and its implications. Most
recently:
[https://www.youtube.com/watch?v=1ssFICVFH40](https://www.youtube.com/watch?v=1ssFICVFH40)

The big risk from my point of view is that currency weakness tends to spook
international investment capital who is exposed to the local currency,
triggering selloffs as capital flees, exacerbating the problem.

~~~
mlyle
It's worth noting that China's capital controls provide some insulation
against this problem-- though they obviously cannot work to compel ongoing
outside investment.

~~~
gamblor956
China's currency controls actually made the problem worse--a lot of non-
Chinese companies immediately backed off on Chinese investments (i.e.,
factories, etc.) as soon as the controls were introduced.

~~~
seanmcdirmid
What do you mean? China has had currency controls for a very very long time.
It doesn’t affect foreigners or foreign companies so much, they give us an
easy out (we can exchange whatever we earn automatically).

~~~
gamblor956
I'm referring specifically to the capital-related currency controls.

A few years ago China clamped down on how much cash a person could send/take
out of China or exchange for foreign currency.

It impacted a number of Chinese companies with operations in the U.S.,
especially Chinese real estate developers like Greenland, and basically
eviscerated the EB5 visa market. I had a number of clients cancel deals
because they couldn't get their money out of China.

~~~
seanmcdirmid
Yes, they clamped down on Chinese quotas, but not foreigner quotas. Your
comment:

> \--a lot of non-Chinese companies immediately backed off on Chinese
> investments (i.e., factories, etc.)

That meant foreign companies on Chinese investments, not Chinese companies on
foreign investments, right?

~~~
DuskStar
Doesn't China require that a lot of ventures be majority owned by Chinese
citizens? I could see that money ending up 'contaminated' and hard to pull
back out of the country later.

~~~
seanmcdirmid
Some JVs have a 51-49 rule, but these are mostly being liberalized. Basically,
most foreign companies are underwater on their quotas so they can convert as
much as they need to. All they have to show is that they either converted that
much to RMB earlier or earned that much and paid taxes on it.

Tech companies like Microsoft fully own their Chinese subsidiary.

------
hourislate
The Chinese are doing everything they can to make sure US tariffs don't affect
US consumers.

And discourage factory work to leave for other countries (Vietnam, Mexico,
Taiwan, Thailand, etc).

~~~
b_tterc_p
Is it easy for blue collar Chinese to leave and work in other countries?

~~~
freehunter
I didn't read their comment as "preventing Chinese citizens from leaving to
work in other countries" but rather "preventing factories in China from
closing and moving to other countries". The workers wouldn't be going with the
factories, the workers would just be unemployed.

------
tuxpenguine
My uneducated guess is that Yuan is still over valued. Based on the personal
anecdotes around me, I can see that the government is trying everything to
tighten the capital outflow. That's not the case for the reverse direction
though.

Everyone in Beijing or Shanghai owning a small condo with 70 lease is
literally sitting on a property of nominal value of millions of US dollars.
How can that value be justified? People are willing to take even 15% discount
to get that assets out of the country.

~~~
sremani
The magic of Chinese two step. There is a glut of Yuan in China while there is
a scarcity outside.

All you have to do is take a look at their M3. PBOC is printing like no
tomorrow, but cleverly puts a wall with they CNY-CNH shit.

Deep Throat says it should be 20 to 1 not 7 to 1.

~~~
vkou
The purpose of this isn't to fuck with foreign economies, or to kill jobs in
America, or any of that other nonesense.

The purpose of this is to serve as a tax on Chinese exporting companies. They
get paid in USD, but they have to pay their suppliers and workers in Yuan.
They are being robbed by their own government, because they are exchanging USD
for Yuan at a disadvantageous rate.

I don't understand why people who don't live in China give two cares about
their currency manipulation.

~~~
sremani
You are seeing the effects of this "manipulated" exchange rate in American
real-estate in every metro-area.

One thing you have to understand is, the exchange controls are for plebs, but
the connected including the members of Politburo and State Owned firms
(directly or indirectly), can happily get dollar in exchange of the funny
money and buy REAL assets across the world. It can viewed benignly or
nefariously based on what you think their end game.

But its effecting every one especially if you are in real-estate but also
other things.

~~~
vkou
1\. Most people who are buying real estate on the coasts don't care about the
exchange rate. They don't even care about the value of the assets they are
buying. They are doing it because they are buying security, a backup plan, a
diversified investment that can't be clawed back by their government, or
exposed to the fortunes and misfortunes of China's economy.

2\. Most of these buyers are doing it while illegally avoiding capital
controls - not with the blessing of the government. It's why Canada is such a
popular destination for this money - it has no reporting requirements. The
whole point behind China's exchange rate policy, is that it allows US dollars
to enter the economy, but due to capital controls, not leave it (Without being
subject to the 'tax' of unfavourable exchange rates.) Chinese nationals buying
property in North America are not working _with_ the policy. They were working
against it

And yes, there's plenty of folks who _do_ have a direct line to the politburo
(Or, more likely, black market channels for exchanging money), and can turn
their yuan into USD, without trouble, and then get that USD out of China. I
don't think they are responsible for the majority of capital flight out of
China.

------
jonathankoren
I don't understand this link. It's a trading quote, with no text and an
irrelevant embedded video.

A much better link would be something that talks about this close. For
instance [https://www.cbc.ca/news/business/chinese-yuan-falls-
to-11-ye...](https://www.cbc.ca/news/business/chinese-yuan-falls-to-11-year-
low-amid-trade-tensions-1.5236518)

I'm still confused by the coverage, since it's trading at 7 CNY to 1 USD.
That's still higher than the 52 week low. Also it's higher on the chart on the
right which shows the 5 year closes. I'm very confused, since coverage doesn't
jive with either chart.

~~~
ccarpenterg
It's low in terms of the Yuan's purchase power vis a vis the US dollar.

So the Chinese need more Yuan to buy the same products/services from the US.
And in contrast, Americans need less US dollars to buy the same
products/services from China.

~~~
jonathankoren
I understand how exchange rates work. What I’m confused about is claim that
this is an eleven year low.

The article claims an exchange rate of 7.0391 CNY to 1 USD is an eleven year
low, yet the 52 week range is 6.6704, and the five year low is below 6.2976.
Typically, these charts show closes rather than intraday ranges, which further
ads confusion about the claim.

~~~
locust101
Calling it lowest ever means that you can get more yuans than ever in 11 years
for 1 dollar. If you look at the chart, it clearly shows that this is the
maximum yuan amount you can get for 1 USD in at least 5 years.

~~~
sokoloff
Right. In other words, "the value of 1 yuan is the lowest in 11 years in terms
of how many dollars it can buy..."

------
samfisher83
The US is running up a huge deficit and lowering rates yet the dollar is
getting stronger. It is kind of strange.

~~~
vkou
The US government as a whole, if you combine Local, State, and Federal
spending, is not running a huge deficit. It is, in fact, paying its debts
down.

You can quip about how sustainable this state of affairs is, but of the three,
only federal debt is growing... And, if you look at inflation-adjusted
metrics, that growth is very minor.

~~~
threeseed
When people refer to US government they mean Federal.

And the concern is that the Federal government has structurally degraded its
budget such that it is running larger and larger deficits.

And unfortunately when you give away money as tax cuts it's often politically
impossible to reverse it.

~~~
pessimizer
It's the balance of payments that's the problem, not government deficits. All
lowering the deficit does when there's a negative balance of payments is
increase private debt.

And if there are recession fears, the last thing you want to do is raise
taxes. The problem is where the tax cuts are, not that they are tax cuts; you
want to cut taxes on people who spend a high proportion of their income on
consumption, not wealthy people who will sit on it.

As for the political impossibility of reversing tax cuts, in the case of cuts
for the rich, this is not at all due to public pressure, but private pressure,
and in that the impossibility of reversing tax cuts is no different from the
impossibility of not enacting them. When politicians are more obligated to
voters than donors, taxes on wealthy people will rise. There is zero pressure
from voters to maintain tax cuts on wealthy people, other than general support
for an entire package of tax cuts if very visible middle class subsidy is
mixed in with them.

~~~
18pfsmt
In the U.S., the bottom 47% pays zero income taxes. The tax rates on the
middle class are far lower than in Europe. Look at the actual tax brackets
(i.e. the data).

As for the idea that the latest tax reform only helped the wealthy:

 _" The analysis Doggett referenced indeed indicates benefits will accrue to
the very wealthy over time. Yet in the first year of changes, the top 1
percent are projected to draw a little over half the tax savings. The
threshold of 80 percent going to the top 1 percent is projected for the tenth
year. Also, Doggett’s stated figure for incomes is too low; it ties to the
first year of implementation."_

[https://www.politifact.com/texas/statements/2017/oct/20/lloy...](https://www.politifact.com/texas/statements/2017/oct/20/lloyd-
doggett/lloyd-doggett-says-80-percent-republican-sought-ta/)

------
pbalau
GBP: "hold my pint"

