Next question: Does it matter?
It really is in both sides self interest to come to an agreement although I'd rather be holding the cards the U.S. has than have the Chinese hand, at least for the moment. As noted Oct. 23:
"China seeks framework for November deal with Trump"
...My favorite Chinese translator says "Hey, we have a 5000 year history of this stuff. Let President Trump think he out-macho'd us, give him something he can hold up as a win and we get back to the plan".Which leads us to FT Alphaville:
Makes sense to me.
I received no response when I asked "Plan? What plan?"I don't think she was referencing the per cap income thing (above)
The spectre of seven
The last time China's currency weakened past Rmb7.0 per dollar, the global economy was in a tailspin.
Now, ten years later, the renminbi is on the brink of again crossing what has become an important psychological level not only for China’s economy, but its political apparatus as well. At pixel, one US dollar fetches Rmb6.93, having shaved off nearly 10 per cent of its value since February.
But as the renminbi edges closer to this big, round number, a growing number of China-watchers are saying Rmb7.0 per dollar doesn’t matter all that much. There’s some truth to this, and “de-mystifying” this threshold, as Robin Brooks of the Institute of International Finance puts it, will probably lead to more productive conversations going forward.
But at a time when trade wars and currency manipulation accusations fly freely from all corners of the White House, breaching this level does carry political importance, whether its justified or not.
When an economy slows and policymakers need to ease monetary policy (especially at a time when others are tightening), the currency tends to weaken. That’s exactly what’s happening in China at the moment, made all the more painful by the Federal Reserve’s penchant for raising rates and the ongoing tariff tit-for-tat with the Trump administration (although some progress was made this week).
By many measures, China’s economy is slowing. Factory output is falling, GDP growth now sits at its lowest level since 2009, and consumer confidence is cooling. Here’s a chart from Capital Economics showing the most recent breakdown of the government’s manufacturing purchasing managers’ index. All five of the PMI components declined in October:
Following this data release, the country’s most powerful body, the 25 man Politburo acknowledged “growing downward pressure” on the domestic economy and “profound changes” in the external environment. The prescription? Per the Politburo, “ . . . to attach great importance to this situation and be more forward-looking to respond in a timely manner.”
That likely means more stimulus in the pipeline. Chinese officials have already cut reserve requirements for banks and boosted infrastructure spending. Again, these efforts weigh on the renminbi....MUCH MORE
