China’s Lonely Fight Against Deflation
The current battle over the renminbi’s exchange rate reflects growing tension between the interests of the “financial engineers” (such as the managers of dollar-based hedge funds) and the “real engineers” (Chinese policymakers). Only if the latter win can currency stability be ensured.
https://prosyn.org/eQ3frsl
HONG KONG – In early February, as China celebrated the start of the Year of the Monkey, a widely circulated hedge-fund newsletter roiled financial markets by predicting a hard landing for the economy, the collapse of the shadow-banking system, and the devaluation of the renminbi. Stability returned only after People’s Bank of China Governor Zhou Xiaochuan, in an interview with Caixin magazine, explained the logic of China’s exchange-rate policy.