
China battles to shore up stocks, yuan after globe-shaking slide - tokenadult
http://www.reuters.com/article/us-china-markets-idUSKBN0UJ00X20160105
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Nutmog
"globe-shaking" "currency tumbled" "wild price swings" These terms are
relative to whatever stability what there in the recent past. No matter how
stable a market is, when it starts to change, reporters are going to label it
like that. The reality is everything's just fine. Look at the price of CNY in
USD for the last 5 years. Before 2011 it was even lower, and nobody cared
then.

[http://www.xe.com/currencycharts/?from=CNY&to=USD&view=5Y](http://www.xe.com/currencycharts/?from=CNY&to=USD&view=5Y)

It's swung over a 10% range during that entire period. Who cares about 10%
change in 5 years? This might be a small surprise for traders who expect it to
change by less than a fraction of a percent each day, but for normal people
it's not relevant. If the economy is collapsing, this exchange rate certainly
isn't a sign of it.

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simonh
I'd have thought implementing rule that halts trading when the index drops by
X% would make a sell off worse, because nervous investors even considering
selling will rush to do so before the threshold gets breached.

~~~
nextweek2
The drop is happening regardless. All the halt does is give space for rational
thinking. Stocks actually worth something should go up whilst others plummet.

~~~
toomuchtodo
People are panicky animals. Even fundamentally sound stocks will fall
alongside the dogs.

~~~
jazzyk
All true, but remember that even the fundamentally sounds stocks got seriously
overbought in 2015.

[https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&e...](https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&espv=2&ie=UTF-8#q=csi%20300%20index)

(change the chart to a 5 year view)

~~~
toomuchtodo
Thanks for that!

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rubyn00bie
If I understand this correctly:

1.) The Yuan and Chinese stocks dipped severely.

2.) The Chinese Central bank put up $20bn to compensate.

If my understanding is correct, this could be good for the Chinese economy? It
reduces the value of Yuan to the ROW (rest of the world), thereby decreasing
the cost of Chinese goods and increasing exports to the ROW.

I'd like to caveat with my knowledge of the Chinese economy and how it
operates is probably well outdated.

Last I knew, it's growth was very export driven and thus dependent on foreign
markets. It was also very strongly influenced by the Chinese government.

It may now be the case now that it has enough inertia from those days to grow
(and hit financial targets) by simply bringing up its own population
(economically). Thus this is a real risk in the Chinese economy and I am an
ignorant ass.

Would anyone mind illuminating the situation for me with with some data,
please?

I'm happy to have been way off the mark and an ignorant ass. Learning is cool.

~~~
sharetea
1.) yuan devaluation -> (accelerating capital flight + Chinese companies
needing to pay more on their dollar denominated debt (more defaults) +
decreasing reserves + declining stock market/RE/assets held in yuan) >>>
increased export

2.) yuan devaluation -> increased export + more money for business owners
(whose money leaves China) + less money for Chinese workers/consumers + no
social safety net -> spending is stagnant

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ChuckMcM
I suspect this is going to be the economics story of 2016, the one where China
decides to jump in on the world stage and discovers the limitations imposed by
participating in that stage. What I hope we end up with is a much more
transparent view of the Chinese economy.

~~~
sharetea
A transparent view would be 1-2 percent gdp growth, 300 percent gasp/debt
ratio, bankrupt shadow banking, bankrupt commodity related state companies, a
trillion left that can be used from reserve, 800 billion per year capital
outflow, etc. not sure China can even take that first step. Not to mention
lack of global consumer brands, pollution, corruption, etc

~~~
hackuser
> 1-2 percent gdp growth, 300 percent gasp/debt ratio ...

Are these numbers real? If so, what are they based on? If they are just
examples of what might be found under the hood, that's fine; I'd just be
interested in some reliable non-official economic numbers.

~~~
austinz
No, just a 'greatest hits' compilation of the same things China detractors
have been complaining about since 1995. Their analysis is no better than the
already dubious "official" numbers.

~~~
hackuser
> a 'greatest hits' compilation of the same things China detractors have been
> complaining about since 1995

That's what we would expect to see in a bubble, criticisms that aren't coming
true until the day it pops. How do we distinguish this situation from a
bubble?

~~~
mikeash
If it were possible to distinguish it reliably, we'd get rich (and the bubbles
wouldn't happen in the first place).

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tokenadult
The latest news update shows the China market (where it is now already
Wednesday, a new trading day) down some more, and the global geopolitical news
for China is not good, with north Korea claiming the test of an H bomb. The
signs of market weakness from economic weakness and political risk appear to
be genuine.

[http://www.reuters.com/article/us-global-markets-
idUSKBN0UK0...](http://www.reuters.com/article/us-global-markets-
idUSKBN0UK01B20160106)

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yueq
This kind of move seems to be a global trend. BOJapan is going to spend $2.5B
to buy ETFs.

