“More ensuing measures are likely coming”, said Zhu Jun, director of the international division of the PBoC.
Zhu’s remark – all at once foreboding and ambiguous – came Saturday, at a China Finance 40 meeting in Yichun, Heilongjiang. Apparently, she didn’t provide any additional color.
Other officials present at the meeting struck a wary tone when discussing this week’s rather dramatic events in the currency space.
Although China sought to calm markets with stronger-than-expected fixes following Monday’s decision to send a message to the Trump administration by letting the yuan breach 7, traders will be on high alert for the foreseeable future.
Until further notice, the fix is the most important “data point” traders will get each day.
According to Bloomberg’s account of Saturday’s Finance 40 meeting, Zhou Xiaochuan (Yi Gang’s legendary predecessor who served for a decade and a half, presiding over everything from China’s crisis response to the 2015 devaluation to the yuan’s ascendance to reserve currency status) warned that the situation risks spiraling into the military and political arenas. He also advocated for a push to advance the yuan in international finance as a way of coping with the obstacles of dollar hegemony.
Chen Yuan, the PBoC’s former deputy governor, cautioned on the dangers of the trade war evolving into a full-blown currency war and suggested the US feels vulnerable due to Beijing’s hoard of US Treasurys. Chen advocated for expanding the use of the yuan in the global commodities trade.
Meanwhile, the People’s Daily was out with a characteristically bombastic commentary on Saturday that carries the amusing headline “The farce of splashing ‘manipulating the exchange rate’ will eventually end in failure”, a reference to Steve Mnuchin branding Beijing a currency manipulator this week.
“After the exchange rate of RMB against the US dollar broke through the 7 mark, the US Treasury Department rudely labeled China as a ‘currency manipulator’. This arrogant act has shocked the world and has also impacted the global market”, the commentary reads.
“Some people in the United States have been unanimously condemned by the international community for ignoring the facts and blaming others for their bad practices”, the Party mouthpiece went on to say.
The People’s Daily cites Larry Summers and the IMF in China’s defense.
“It should be noted that claiming black is white creates trouble and amounts to playing with fire”, the commentary continues. “The facts will eventually prove that this farce perpetrated by some people in the United States will end in failure”.
You laugh (and we do too), but setting aside the overwrought nature of China’s economic propaganda, Beijing is merely stating facts.