Expect a shock devaluation in Chinese yuan after Octoberby Jim Rickards
The CCP leadership consisting of a General Secretary, Politburo Standing Committee, Politburo, and Central Committee.
The seven-member Politburo Standing Committee runs the CCP.
The General Secretary is the single most powerful person in the leadership. The conventional government is controlled by the CCP, which holds the real power.
In recent decades, the General Secretary serves two five-year terms, and is then succeeded by another member of the Standing Committee.
At the end of the first five-year term, the Standing Committee elevates one or two candidates who are most likely to succeed the General Secretary at the end of his second term.
Leading Chinese analyst Leland Miller, in his China Beige Book report, explains that actual credit conditions in China are not as tight as benchmark rates make them sem.
China’s reserve position of $4 trillion in 2014 has now shrunk to about $3 trillion.
Approximately $1 trillion of that is in illiquid investments, such as the CIC portfolio, or is committed to long-term lending via NDB, AIIB, and the One Belt, One Road initiative.
That leaves about $2 trillion in liquid reserves to do damage control.
About $1 trillion of that will be needed to clean-up the banking system as state-owned enterprises (SOE) and wealth management products’ (WMP) bad debts come home to roost. That leaves only $1 trillion to defend the exchange rate.
Based on the rate of capital outflows in 2016, a $1 trillion war chest will be exhausted in less than a year.
A drop of 20% against the dollar, to a level of 8.50 to one dollar, would be viewed as sustainable. That should halt capital outflows.
Once the yuan is devalued, interest rates could be lowered to stimulate growth and keep the jobs machine humming.
China will abandon one leg of the impossible trinity (a fixed exchange rate) in order to preserve the other two (open capital account, and independent interest rate policy).
Based on far smaller yuan devaluations in August 2015 and December 2015, the repercussions of a new devaluation will not be confined to China.
The U.S. stock market crashed over 10% on both prior occasions. An even larger correction could be expected when the maxi-devaluation comes. A flight to quality in gold is another predictable result.
Source: Currency Wars Alert
http://thecrux.com/jim-rickards-chinas-red-october/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"