http://www.zerohedge.com/news/2016-03-13/there-wont-be-wave-layoffs-no-stimulus-needed-china-insists-no-one-panic
But without more leverage, the economic deceleration becomes even more acute. Which leads us to the conclusion we drew long ago: China is attempting to deleverage and re-leverage at the same time - and that’s obviously impossible. You can see examples of this policy schizophrenia everywhere. For instance, in January, TSF grew by a massive $500 billion and yet meanwhile, Beijing is busy discussing how to kill off unprofitable, highly indebted “zombie companies.”
The proverbial cherry on top is the yuan devaluation debacle which makes it difficult for the PBoC to ease further if they want to avoid exacerbating expectations of a much weaker currency - expectations that led directly to massive capital outflows last year.
It’s with all of that in mind that we bring you comments from two prominent Chinese officials, People’s Bank of China Governor Zhou Xiaochuan and Xiao Yaqing, who oversees the government commission that looks after state assets.
Speaking on the state of the Chinese economy and whether the PBoC will ultimately be forced to do more if things continue on the trajectory they’re on, Zhou did his best to put on a brave face. “Excessive monetary policy stimulus isn’t necessary to achieve the target,” he said, referring to the country’s 6.5% growth goal over five years. “If there isn’t any big economic or financial turmoil, we’ll keep prudent monetary policy,” he added.
Someone apparently forgot to tell Zhou that there indeed is quite a bit of “big economic and financial” turmoil and it emanates from China in the form of the collapsing economy and the carnage wrought in global markets by the bank’s bungled attempt to devalue the RMB.
In any event, he had other soothing words for a market that increasingly looks at China more as a source of turmoil than as the bedrock of the global economy. “There’s no need,” he said, “for anyone to buy dollars in a rush” even though the PBoC is “unable to forecast if the yuan’s volatility will end.” Further, “China won’t rely on exports for GDP growth, [but will instead] depend on domestic demand.” Good luck with that. It’s going swimmingly so far.
Comments