From Ambrose Evans-Pritchard at the Telegraph:
China's state media decries "unimaginably fierce resistance" to economic reforms, a sign that president Xi Jinping is becoming furious with incompetent party officials
Capital outflows from China have surged to $190bn over the last seven weeks, forcing the authorities to intervene on an unprecedented scale to defend the Chinese currency.The exodus of funds is draining liquidity from interbank markets and has pushed up overnight Shibor rates by 30 basis points in the last ten trading days, a sign of market stress.
Yang Zhao from Nomura said $90bn left the country in July. The pace has accelerated since the central bank (PBOC) shocked the markets by ditching its currency peg to the US dollar.
Capital flight for the first three weeks of August is already close to $100bn, despite draconian use of anti-terrorism and money-laundering laws to curb illicit flows.Recently from A.E-P.:
Mr Zhao said the PBOC had intervened “very aggressively” to stabilise the currency and prevent the devaluation getting out of hand, but this automatically tightens monetary policy.
The central bank will almost certainly have to cut the reserve requirement ratio (RRR) for banks to offset the loss of liquidity, with some analysts expecting action as soon as this weekend.
The PBOC’s latest report calls for “monetary easing”, dropping the usual caveat that measures should be targeted. It is a sign that Beijing is preparing blanket stimulus, despite worries that this could lead to a repeat of the credit excesses that have haunted China since the post-Lehman boom.
The PBOC has already injected $160bn into the China Development Bank for projects....MORE
