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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: bart13 who wrote (132741)	3/31/2017 6:32:07 PM
From: TobagoJack	Read Replies (3) \| Respond to of 217801

had always noted that the levers, buttons, switches, dials, and arm-twisting are too numerous to enumerate, those that keep the show going and going and going - watch & brief to see if the impossible is possible scmp.com China central bank paper claims Beijing can make ‘impossible trinity’ possibleChinese central bankers have done the economic “impossible”, finding a way to have a stable yuan, a free market and effective monetary policy. That is the assessment of two central bank researchers, who claimed in a paper published on the People’s Bank of China’s website on Thursday that Beijing would continue to realise the “impossible trinity”. China is trying to keep the yuan exchange rate steady, create an open domestic market and ensure the independence of the central bank – goals that many observers see as conflicting and destined to fail. But in their paper, Sun Guofeng, head of the central bank’s financial research institute, and Li Wenzhe, a researcher with the PBOC’s monetary policy department, said policymakers had already balanced these targets through careful management of capital flows, partial liberalisation of the exchange rate and better coordination with other central banks, especially the US Federal Reserve. Sun and Li said the country had coped better than Brazil, Russia and Indonesia with tapering by the Fed, and would continue to do so through “macro-prudential management” of capital flows, a flexible approach to cross-border money flows instead of blanket capital account controls. A moderately floating exchange rate and coordination with other monetary authorities would also smooth the way ahead, they said. “The policy combination of free capital flows plus a free exchange rate failed to completely ward off external shocks. Monetary policy became less independent and had to move passively along with the direction of Fed policy,” the authors said, referring to “failures” in Brazil, Russia and Indonesia. “Irrespective of whether the exchange rate is a free float or fixed or in between, central banks have to manage capital movement. They also need to make currencies more flexible and coordinate policies with overseas counterparts,” the paper said. The paper also shed light on some of the central bank’s operations to fend off speculators shorting the yuan. A few weeks after the China rattled the markets with a 2 per cent devaluation of the currency in August 2015, the PBOC asked banks to pay a 20 per cent deposit for foreign exchange forward contracts as a way to make it more expensive to bet on yuan depreciation, the paper said. On January 25 last year, the PBOC also requested foreign banks lock up some of their deposits at domestic banks to make it more expensive for foreign speculative forces shorting the yuan. “Overseas speculators need to borrow yuan to short the currency, and the cost of borrowing the yuan is a key factor,” the paper said. The Chinese currency has avoided sharp depreciation against the US dollar, and most institutions are forecasting a fall of just 3-5 per cent against the greenback for this year. Beijing tightened capital controls in 2015 to stem the risks of capital outflows and a weakening yuan, making it harder for firms to send money abroad. The controls have raised concerns among foreign business operating on the China. Sun and Li said Beijing could not only rely on capital controls to manage “external shocks” and it could afford more flexibility in the exchange rate.